For years, Halosource was what you might call a solution in search of a problem. It had anti-microbial technology that could theoretically kill viruses and bacteria anywhere and everywhere. But when it came down to making actual commercial products, it took many years to find its niche in purifying water.

Now one of the veterans from the early days at Bothell, WA-based Halosource, Simon Johnston, says the time has come for a few of the innovative antimicrobial applications that were too far ahead of their time. First on the list: socks.

I know, I know, what could possibly be innovative about socks? Cotton, polyester, wool, that’s all you need to know, right? It turns out Halosource spent a lot of time in the ’90s thinking about how to use technology that incorporates antimicrobial compounds into textiles. Socks, kitchen towels, bedsheets—these are all obvious fabrics used by millions of people every day, and which can become breeding grounds for hardy bugs like viruses, bacteria, or fungi.

Halosource still applies some of its technology to textiles, like odor-fighting kitchen towels, but this idea never worked for socks. The chemical application cost too much to be competitive, and you had to apply such large quantities of the finish that it made the socks too brittle. They’d fall apart after you ran a few miles in an ordinary pair of sweat socks, Johnston says.

“What looks great in the lab…when you go into the real world, sometimes you get into a real-world manufacturing site, you just don’t come out with what you thought you had,” Johnston says. “We spent a lot of time trying to put square pegs into round holes.”

Simon Johnston

The new variation on this bug-killing textile idea is taking shape at a Bellevue, WA-based startup called Antimicrobial Technologies Group. The company, led by Johnston and co-founder Pam Goldschmidt, has raised a modest $500,000 from friends and family to pursue their renewed bug-killing vision in socks. But the company isn’t focusing on just any kind of sock—it has its sights on people suffering from diabetic foot ulcers.

Why? The diabetes epidemic is raging, of course, affecting an estimated 25 million people in the U.S. Many of them suffer from poor circulation in their extremities, which leads to sores that get infected. The antimicrobial polymer technology, licensed from the University of South Dakota, is designed to overcome some of the previous challenges that made antimicrobial socks impractical. The chemical compounds embedded in these socks now come in such a potent dose that these socks look (and smell) just like any fresh cotton sock off the shelf, Goldschmidt says. The cost of the technology has come down so fast that the new socks can be mass-produced for pennies on the dollar, and compete on price at $10 to $20 a pair, along with other compression socks sold to diabetics to help with circulation, Johnston says.

Johnston, 63, is betting these new socks will sell. He’s ordered a shipment of 15,000 pairs that he plans to start selling directly to consumers online as soon as April. He’s hoping to capture …Next Page »

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In what may be a pre-emptive announcement before next week’s GSMA Mobile World Congress in Barcelona, San Diego’s Novatel Wireless (NASDAQ: NVTL) says it has successfully made a data transmission call using Long Term Evolution (LTE) 4G technology.

LTE is one of several next-generation wireless technology standards that promise increased capacity as cell phone users increasingly download data, photos, and video from the Internet. Novatel says LTE can provide data rates as high as 50 megabits per second on the uplink and 100 megabits per second on the downlink and “an enhanced user experience by leveraging new, wider bandwidth spectrum.”

But as Phone Scoop blogger Eric M. Zeman notes, “Novatel didn’t state what speeds it attained, nor whether or not the equipment used was standards compliant.”

Novatel says that many wireless system operators are planning to overlay fourth-generation LTE systems on their existing 3G networks to augment data capacity in important areas. The company also says it is working with operators, which it did not identify, and plans to launch commercial data services later this year. In the statement issued by Novatel, CTO Slim Souissi says, “We believe our aggressive development efforts will enable us to deliver these innovative solutions with the fastest possible time to market.”

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The story of Infinity Pharmaceuticals can be told through three people. Steve Holtzman got the company started, and raised the money for the company’s proprietary chemistry. Julian Adams brought the focus on cancer drugs. Now it’s up to Adelene Perkins to show that the company’s treatments work, and can be successfully marketed to patients.

At least this was the perspective from Perkins, the new CEO of the Cambridge, MA-based biotech company (NASDAQ: INFI). I sat down with her a few weeks ago at an investing conference in San Francisco to learn more about the situation she’s inheriting at Infinity and where she intends to steer this ship.

Perkins took the top job on Jan. 1, as Holtzman moved upstairs to executive chairman. She had clearly paid her dues before getting the corner office: Perkins was the main architect of a deal in November 2008 with Stamford, CT-based Purdue Pharma and its overseas affiliate, Mundipharma, which basically provided a whopping five years of operating cash.

But things took a turn for the worse in April, as Infinity halted a pivotal clinical trial of its lead cancer drug candidate when it was found to be more toxic at high doses than researchers had anticipated. The company’s stock is still down 28 percent from April 15, when it scrapped that trial of IPI-504. Now Perkins, the veteran dealmaker, has the job of finding a way forward, and to generate some hard clinical trial data that will rekindle enthusiasm for the company. She didn’t give me the impression it’s going to happen in a quarter or two, and it doesn’t involve anything radically different.

“You won’t see Infinity embark on an entirely new course,” Perkins says. “My signature is very much on the course we’ve taken to date.”

Perkins is a familiar face around Boston biotech, but I wanted to hear her tell the story of the path she took to get to this point as CEO of Infinity.

First off, she wasn’t necessarily destined to go into biotech. Perkins got an undergraduate degree in chemical engineering from Villanova University, then worked for a while at General Electric and got an MBA from Harvard Business School. (Interestingly, she never mentioned Harvard during our conversation, referring to it only as “business school.”)

Right out of business school, in 1985, Perkins didn’t know what she wanted to do. “My eyes had been opened to so many careers, I wondered, now where do I go?” she says. So she hedged her bets, and took a consulting job in Boston at Bain & Company, knowing that she’d get exposure to a wide range of clients and industries that would help her make up her mind. She stayed a little more than seven years, splitting her time between pharmaceutical clients, and health care providers.

“I just loved the quality of thinking that I found with my clients in the pharmaceutical space. I felt that’s where I felt at home, and inspired,” Perkins says.

By 1992, Perkins found a full-time job in the industry as one of the early pioneers—Cambridge, MA-based Genetics Institute. It was a fun time to join the biotech industry, she says, and apply a lot of that strategic thinking from business school and consulting into a new and fast changing …Next Page »

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[Updated Feb. 9 with more comments---see below] Xconomy is very sad to note that John Mucci, the co-founder and former CEO and director of SiCortex, the Maynard, MA-based startup that sought to build a new generation of energy-efficient supercomputers, passed away yesterday of a heart attack, according to reports we have received.

Mucci had a long history as a sales executive, and before co-founding SiCortex with Matt Reilly and Jud Leonard around 2003, had been a vice president at Thinking Machines Corporation, where he worked from 1986 to 1994, according to his LinkedIn page. He had also served in several executive positions at Digital Equipment Corp., and had co-founded another startup, TopicalNet (previously known as Continuum Software), according to his bio on the SiCortex site, which is still up although the company announced it was closing its doors last May.

“It is a sad day for all… less competition, unemployed seventy some workers…” Mucci wrote Xconomy in an e-mail at the time SiCortex closed, even though he had been replaced 10 months earlier as CEO. I had not verified the current status of SiCortex at the time of this post.

SiCortex had been funded in part by Polaris Venture Partners. Polaris general partner Bob Metcalfe wrote this in an email tonight: “While working on SiCortex, John and I walked together, he my guide for three years, through the exhibits of the SuperComputing conferences. Everyone there knew and liked John. And I mean everyone.”

Mucci, who had a B.S. from Pennsylvania State University and a master’s degree and a Ph.D. from Carnegie-Mellon University, was reportedly working on a new venture. I could not verify his age by the time of this post.

Update, Feb 9, 2009: SiCortex co-founder Matt Reilly, who says Mucci was 67 years old when he died, writes this: “John was a man of great enthusiasms, but I think the greatest was building connections with and between people. John didn’t build SiCortex, as much as he knitted it together. As a partner, a coworker, a friend, and guide he gave more than I could ever repay.

John was exploring several new opportunities and ventures at the time of his passing. He will be sorely missed.”

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Connect, the San Diego non-profit that supports local technology and entrepreneurship, says it is opening an office in Washington D.C. “to be part of the process,” and to represent the interests of San Diego’s innovation community.

Establishing a lobbyist in Washington was a key part of an initiative that Connect CEO Duane Roth unveiled last summer that was intended spur San Diego’s innovation economy. Roth’s plan primarily called for increasing federal funding for research and development in San Diego, and for encouraging the formation of more elite research institutions here.

In a statement e-mailed this evening, Roth says Connect’s new advocate will focus in five areas:  intellectual property (including trade and anti-trust); funding for basic research; regulatory issues; investment capital; and workforce development (i.e. foreign worker visas).

Connect says Roth has been working with a search committee to recruit a full-time advocate for the office, which will be at the University of California’s 11-story complex in northwest Washington. It was unclear how the position will be funded. In its statement, Connect says only that its board of directors supported “the establishment of a Washington office to provide a consistent presence and close relationships with legislative offices and Administration officials.”

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Boston-based Sand 9, which is developing microelectromechanical resonators that could replace quartz crystal frequency sources in 3G phones, GPS devices, and other applications, said today that Vince Graziani, a board member and former CEO of VBrick, has been appointed chief executive officer. Founded in 2007, Sand 9 is backed by Flybridge Capital Partners, General Catalyst and Khosla Ventures.

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With online video consuming more and more bandwidth, ViaSat’s decision to design its own high-capacity satellite for Internet service is looking more and more prescient. We’re beaming that and the rest of the news to you now, so take off your foil hats and tune in.

—Frank Quattrone, a former investment banker and controversial figure following the dot-com boom, told a San Diego Venture Group gathering that the financial industry has grown too large, too over-extended, and strayed too far from its traditional focus on lending, trading, and principal activities. Quattrone spoke nostalgically about the tech IPOs he handled before Netscape’s 1995 IPO, which he also handled. That transaction, triggered a casino mentality of ever-bigger deals, he said.

—Merger rumors about San Diego’s Leap Wireless (NASDAQ: LEAP) are resurgent, following a Wall Street Journal report last week that Leap has hired investment bankers to advise the company on its strategic options. Leap, which provides flat-rate phone service through its Cricket operating company, has previously explored merger opportunities, primarily with Dallas-based MetroPCS. In a report Saturday, the San Diego Union-Tribune cast doubt on the latest speculation, citing a JP Morgan Chase analyst.

—Plans by Carlsbad, CA-based ViaSat (NASDAQ: VSAT) to launch its own satellite to provide high-capacity Internet service were helped significantly by the company’s $568-million acquisition of …Next Page »

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Viryd Technologies, a wind turbine technology startup spun out last May by San Diego’s Fallbrook Technologies, has secured a $5 million investment that includes a Chinese maker of automotive components.

Viryd was founded near Austin, TX, to integrated Fallbrook’s proprietary transmission technology in power-generating wind turbines for the renewable energy. Unlike a conventional transmission, which uses a set of gears with specific fixed-speed ratios, Fallbrook’s continuously variable transmission uses a planetary mechanism that “shifts” seamlessly as a drive train accelerates and decelerates.

Fallbrook CEO William Klehm tells me that Viryd shares many of the true-believer angel investors who invested $25 million in Fallbrook after it was founded in 1998, and who joined in the $29.4 million raised last year in Fallbrook’s first round of venture funding. Neither Viryd nor Fallbrook has identified its individual investors, although Klehm has previously disclosed that Fallbrook’s angels include Gary Jacobs, son of Qualcomm founder Irwin Jacobs, and Gary Weiss, whose Weiss Group provides consulting and executive search services.

Viryd is announcing today it has raised another $5 million from its existing investors and China’s Ningbo Shentong Auto Decorations. Shentong also will name a representative to Viryd’s board of directors. The Texas company raised $5M from  individual investors last year. Viryd and Shentong Group plan to form a joint venture to manufacture wind turbines for markets worldwide, and especially in Asia and China, where the market for renewable energy is just emerging.

Viryd says the design of its drive train enables the rotors of a wind turbine to rotate more efficiently at any wind speed. Its design also allows for the use of an inexpensive generator that can be connected directly to the utility grid without power electronics and inverters, according to the company. Fallbrook, meanwhile, continues to develop its NuVinci continuously variable transmission for the automotive market, saying its transmission without gears operates more efficiently and at lower cost than conventional transmissions.

Viryd’s deal with Ninbo Shentong Auto could bear implications for Fallbrook as well. Based in Yuyao City in mainland China, the company’s customers include Shanghai General Motors, Shanghai Volkswagen, FAW-Volkswagen, Dongfeng Peugeot Citroen AutoMobile (DPCA) and Beijing Mercedes-Benz (Daimler Chrysler).

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One of the buzzwords I keep hearing is that biotech investors want companies that are “de-risked.” This is kind of amusing, because the complex nature of biology makes biotech drug development one of the riskiest investments of all. But this craving for security is positive, at least for a while, if you are San Diego-based Optimer Pharmaceuticals.

Optimer (NASDAQ:OPTR) removed a lot (if not all) of the risk from its profile Thursday when its lead drug candidate passed a second pivotal clinical trial. The company showed its antibiotic for “C.difficile” bacterial infections, in 535 patients, was roughly equal to the gold standard antibiotic at curing people, and twice as good at preventing dangerous recurrences. That finding was consistent with another study of 629 patients reported in November 2008.

Not surprisingly, Optimer’s stock climbed as much as 15 percent Friday morning , before settling down to a modest 6 percent gain, closing at $12.54 a share.

The success of this pivotal clinical study means that Optimer is racing to send in an application to the FDA for clearance to start selling its first product, fidaxomicin. Optimer plans to file the FDA application by this summer, and it hopes to get a 6-month expedited review, which should make the drug available in early 2011, CEO Michael Chang says. Another application is being prepared for Europe.

If Optimer can get through the regulatory agencies, it will be in a unique position. There is no other antibiotic in development specifically for “C.diff” infections that’s within five years of reaching the market, Chang says, while incidence of this potentially deadly bug is growing. This is sure to spark plenty of speculation about who might form a partnership with Optimer to market this drug overseas, or who might want to buy the company altogether.

Michael Chang

“We expect shares likely will continue to move higher ahead of potential lucrative partnership opportunity/take-out possibility,” said Eun Yang, an analyst with Jeffries & Co. in New York, in a note to clients on Friday. “We view regulatory risks as very low.”

When I met Chang a few weeks ago at the JP Morgan Healthcare Conference in San Francisco, he tried to pooh-pooh any speculation of an imminent partnership, or takeover. I asked him why pharma hadn’t yet written a big partnership check already, given that fidaxomicin had passed a major Phase 3 study in November 2008.

“Pharma thinks that small startup companies are desperate. So they are playing …Next Page »

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Zafgen arrived on the Boston biotech scene about 18 months ago with blue-chip venture backing, a highly regarded scientist as CEO, and an audacious idea. The Cambridge, MA-based company was developing a powerful new weight loss drug made to work unlike any other treatment in development, by cutting off the blood supply to fat tissue.

One year later, results are in. The idea was wrong.

“That was the theory,” says CEO Tom Hughes. “It doesn’t appear to be the case.”

As it turns out, though, that’s not the end of the story. Allow me to begin at the beginning.

Zafgen first emerged in public in September 2008. That’s when Hughes joined the company after a stint as global head of cardiovascular and metabolism research at the Novartis Institutes for Biomedical Research in Cambridge. Third Rock Ventures and Atlas Ventures provided the initial backing. The idea was to build on research at Children’s Hospital Boston that found drugs which are made to block formation of blood vessels—a successful cancer-fighting strategy—might also help shrink fat tissue. It was a provocative finding from mouse experiments, partly because nobody had really tried it before. Many other drugs in development for obesity work on receptors in the brain, trying to coax the body to think it’s full and stop eating.

VCs listened with some interest because obesity is one of the biggest market opportunities in the pharmaceutical business now. An estimated two-thirds of American adults are overweight or obese, according to the Centers for Disease Control and Prevention.

One of the key things Zafgen learned over the past year, based on detailed animal experiments, was that its drug didn’t work through the mechanisms it intended. The company conducted experiments on its lead candidate and found at the tiny doses it intended to use, “we have absolutely no effect on angiogenesis,” the scientific term for formation of new blood vessels.

Tom Hughes

Neverthless, Zafgen’s scientists had some good reasons to still press forward. They didn’t really know why it was working, but that didn’t change the fact they saw profound weight loss and fat tissue shrinkage in mice and rats. The effect was strong enough that Zafgen envisioned developing the first drug powerful enough to compete with bariatric surgery.

So how might Zafgen’s molecule produce this magnitude of weight loss? Hughes says a couple of theories have emerged based on studies by the company’s collaborators, and some external research published in the past year. One idea is that in obese people, cells in their fat tissue lose their ability to release fat acids into the bloodstream, where they can be burned up as energy. Another is that ketone bodies—certain byproducts of fatty acids that get burned up as energy—get suppressed when obese people have high amounts of insulin circulating in the blood. This makes it more difficult for the body to burn energy from fat, and more likely to store it away in fat tissue, he says.

So while Zafgen’s drug, given at low doses, had no effect on blood vessels, it did show an ability to “unlock” the fat tissue so it can release fatty acids, Hughes says. The company found its drug is also stimulating production of more ketone bodies, so that when fat is released, it can be burned up …Next Page »

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While venture investments in cleantech startups declined last year, technology advances in renewable energy remain a hot area of interest for both cleantech innovators and investors. In an effort to gain a better understanding of the solar energy market, especially in the photovoltaic segment of the industry, I sought insights from Mike Hall, the CEO of El Cajon, CA-based Borrego Solar Systems.

Borrego is a fast-growth company that finances, designs, and installs grid-connected photovoltaic solar systems. Much of Borrego Solar’s business is concentrated in New England and California. Before getting to our Q&A, however, a little background is in order.

Borrego Solar Systems was a dormant, 20-year-old business when Aaron Hall, a senior at Northwestern University, developed a venture business plan for the small solar company as part of an undergraduate entrepreneurship class. A Hall family friend, San Diego State University physics professor James Rickard, had started the company in 1980, in part to install a solar system on his off-the-grid home in Borrego Springs, a small desert town east of San Diego. Rickard liked Hall’s business plan so much that he sold half the business to Hall, who took over at Borrego shortly after his 2001 graduation. They each put in $20,000 to restart the company.

Since then, Hall says the company, which is based in the San Diego suburb of El Cajon, CA, has grown into one of the nation’s top five contractors specializing in designing and installing grid-connected photovoltaic solar systems. With more than 165 employees in seven offices nationwide, Borrego Solar says it has installed more than 1,000 photovoltaic systems.

Last year, Inc. magazine named Borrego Solar to its list of “Fastest-Growing Private Companies” for the third year in a row. Inc. ranked Borrego Solar at No. 321 in the magazine’s 2009 list of 500 fastest-growing companies, based …Next Page »

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Ding, ding. What’s that sound? It’s Isilon Systems ringing the NASDAQ market closing bell at 4 pm ET this afternoon.

The Seattle data storage company (NASDAQ: ISLN) is celebrating its first quarterly profit in its nine-year history. I caught up with CEO and founder Sujal Patel by phone from New York this morning after the company’s earnings call.

Isilon’s revenue for the fourth quarter of 2009 was $37.5 million, up 23 percent from $30.5 million in the previous quarter and up 18 percent from $31.8 million in the fourth quarter of 2008. That translated into a small quarterly profit of $140,000, as compared with a net loss of $4.9 million in the third quarter of 2009. The company’s revenue for all of 2009 was $123.9 million, up 8 percent from $114.4 million in 2008.

“It is a small profit, but it’s an important milestone for the company,” Patel says. “It provides validation for the business model.” That model includes an increasingly successful global channel strategy that targets sales in the $500,000 to $1 million range, he says.

The foundation for Isilon’s comeback was laid in the past two years, as I detailed in October. The company, which had come crashing back to earth after a high-flying IPO in late 2006, had a bit of a restart the following year, when Patel was renamed CEO. (He had previously been chief executive for Isilon’s first three years). Patel led the charge to reinvest in R&D, established a more cost-effective product distribution strategy, and brought in a more experienced senior management team.

But its technology has always been the company’s main advantage. Isilon’s network-attached storage system helps companies deal with huge amounts of unstructured data in a relatively cheap and easy way. (It also has products in virtualization, archiving, and cluster computing.) The company’s big customers include Sony, XM Radio, LexisNexis, Facebook, MySpace, Kodak, Adobe, and major movie studios and TV networks. But Isilon has also expanded a lot from its original focus on media and entertainment companies. Patel says in the last quarter, media made up only 32 percent of its business, while other sectors like online services (11 percent), government (10 percent), and biomedical research (16 percent) have become quite significant.

I asked whether we should expect to see Isilon go for higher profits this year. “This will be a growth year for us, and we will expand our operating margin,” Patel says. “We are a growth company, and we may make a tradeoff for further profitability and go for further growth.”

He says the big challenge for Isilon is that “there are far more opportunities out there” than it can successfully reach for. “We’re focused on building a scalable go-to-market strategy and a scalable partner model,” he says. He adds that he feels “very confident” in the company’s level of innovation, product roadmap, customer strategy, and especially its culture of customer focus and drive.

Now Isilon is looking to settle into its role as one of the few successful mid-size public companies in the Seattle tech community. It currently has about 360 employees and is actively hiring, with “a lot of jobs open,” Patel says.

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Alkermes is known for making drugs stable and long-lasting in the bloodstream. Today, the Waltham, MA-based company is announcing it has invented a new way to do the same thing, but at lower cost and with fewer manufacturing hassles. There’s also the potential that the new technique could be used on more drugs, and lead to greater convenience for patients.

The company (NASDAQ: ALKS) is announcing today that it has invented a new platform, and filed a raft of patent applications, around what it calls LinkeRx technology. Alkermes intends to prove the value of this idea first with a modified version of aripiprazole, a $2 billion-a-year antipsychotic medication marketed by Bristol-Myers Squibb as Abilify. I got the rundown on what’s different about the new technology, and the business strategy behind it, during a conversation yesterday with CEO Richard Pops.

For those new to the story, Alkermes has built its company around the idea of taking existing drugs and packaging them in biodegradable polymer microspheres that last longer in the blood. This allows patients to take fewer injections, and avoid peaks and valleys of drug concentration in the blood that can come from once-daily therapies. The Alkermes technology is currently used in Johnson & Johnson’s risperidone (Risperdal Consta), a $1.4 billion annual seller, which helps schizophrenia patients stay on the meds they need, Pops says. Alkermes is also providing critical enabling technology for exenatide once-weekly, a diabetes treatment that San Diego-based Amylin Pharmaceuticals and Eli Lilly are trying to get approved by the FDA.

Richard Pops

While the microsphere technology represents Alkermes’ past and present, the new technology will be a big part of the future, Pops says.

“This is actually a big advance,” Pops says. “It’s been a glimmer in our eye for the last several years.”

This requires a little bit of background before diving in. Today, Alkermes uses an expensive, proprietary, sterile manufacturing process to encapsulate drugs with a biodegradable polymer in a microsphere. The polymer, when exposed to body temperatures, is designed to slowly dissolve and release the active drug. The finished product comes in a dry powder, which needs to be kept refrigerated so it doesn’t release the drug prematurely. It has to be mixed with a water-based solution, and shaken, before it can be injected into the patient.

“We said, ‘Let’s get rid of the polymers and see if we can re-engineer the molecule itself,” Pops says.

So Alkermes’ chemists went to work on LinkeRx. The method uses a proprietary linker and chemical tail that’s attached to an oral drug, which creates a new molecule that’s long-lasting and injectable. The newly engineered drugs don’t need to be kept in a refrigerator, and can be distributed …Next Page »

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San Diego-based aFraxis is working to advance a possible drug treatment for Fragile X syndrome identified by MIT’s Susumu Tonegawa. Meanwhile Waltham, MA-based Syndax Pharmaceuticals is developing an anti-cancer drug that came out of Ron Evans’s lab at San Diego’s Salk Institute. That’s life sciences, and this is Xconomy:

—San Diego-based aFraxis CEO Jay Lichter told Luke the early stage biotech has identified several hundred compounds that appear capable of turning off a possible drug target for Fragile X syndrome, the second leading cause of mental retardation. Denise, who worked with Luke on the story, reported that aFraxis was founded in 2007, with funding from Avalon Ventures and based on research by the Nobel laureate Susumu Tonegawa of MIT.

—BrainCells, a San Diego biotech, is planning its drug development strategy after reporting attention-getting results six months ago from a clinical trial of a combination drug for treating depression. When the anti-anxiety drug busiprone was combined with the hormone melatonin, BrainCells researchers got results comparable to standard anti-depression treatments based on selective serotonin reuptake inhibitors.

—San Diego’s Illumina (NASDAQ: ILMN) is among the investors that just placed a $28 million bet on U.K.-based Oxford Nanopore Technologies, which has plans to sequence entire human genomes, possibly for as little as $1,000 per genome. Illumina previously invested $18 million in …Next Page »

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If Seattle is to occupy a future place of dominance in the biotech world, it must foster more of an “incubator” culture. There is a “valley of death” between the well-funded labs of academia and private venture funding that is difficult to cross.

The National Institutes of Health funds non-profit institutions like universities for fundamental research. Whereas private venture dollars migrate towards technology that has already been proven to a level far beyond what is common in a university lab. So how does one raise capital to take technology from the lab to a venture fundable stage?

Attempting to bridge the chasm are things like federal Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) grants but they realistically take 12+ months to get, require an institutional affiliation, and “virtual companies” are ineligible—what madness! The reason my company would apply for such a grant is because we are a “virtual company” and need pay for early data generation (read: lab space and reagents). Even if I was willing to stomach the bureaucracy, and wait more than a year for a modest chance at getting the grant (which I’m not), we’d be ineligible anyway.

Washington’s own Life Sciences Discovery Fund (LSDF) seems to have recognized this problem and offers “commercialization grants” of up to $150,000. However, they only offer the grants to non-profits (last year 100 percent of them went to the University of Washington). I’ve been told that it is unconstitutional for the LSDF to give money to companies (our state prohibits direct investment into companies). It seems counterproductive as a strategy however, given that non-profits don’t commercialize things—companies do. It’s the entrepreneurs that take ideas from labs and build companies around them and unfortunately they are a group the state is explicitly not helping.

Seattle has a great angel investor scene, but few angels in the main networks feel qualified to be investing in early stage life science companies.

The only organization in Seattle that I’m aware of that addresses this need is the venture backed Accelerator Corporation. They provide funding, lab space, and business support for early stage startups. However, on average, they take on two to three companies a year—hardly enough to support the future of Seattle’s biotech empire by itself.

In our case we’ve had to turn to San Francisco …Next Page »

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It was a big deal in October when ViaSat (NASDAQ: VSAT), the Carlsbad, CA-based specialist in satellite-based communications technologies, announced it was acquiring WildBlue Communications, a suburban Denver, CO-based internet service provider. The acquisition, once revealed, made a lot of sense. As a satellite-based provider of high-speed Internet service in mostly rural communities, WildBlue made a good fit with ViaSat’s broadband networking business.

But the size of the transaction, a cash-and-stock deal valued at $568 million, was a sign that ViaSat has attained a higher plane of corporate existence. While it did not rank among the 10 biggest M&A deals of 2009 (or even among the tech industry’s 10 biggest M&A deals), it was among the biggest venture-backed M&A deals in the last three months of last year. It serves as one more indication that the 24-year-old company that prides itself on its steady growth and stability changed its trajectory dramatically two years ago when it announced plans to build and launch its own $450 million communications satellite to provide high-speed Internet service.

To get a better understanding of ViaSat’s changing strategy, I recently sat down with chairman and CEO Mark Dankberg, who co-founded the company in 1986 with Mark Miller and Steve Hart. (When we met last month, Dankberg told me the ViaSat-1 satellite, which is being built by a subsidiary of Loral Space & Communications, remains on schedule for launch in 2011.)

The ViaSat co-founders’ initial strategy was to parlay their expertise in military satellite communications into contracts for engineering and proposal support with defense prime contractors on major satellite programs. Over time, they expanded beyond government communications by developing a variety of satellite-based equipment, software, and services for commercial customers.

By 2007, the year ViaSat’s revenue surpassed $500 million for the first time, Dankberg says the company was on the threshold of deciding whether or not to build its own satellite. As Dankberg explains it, the company had been in the satellite business all along, so the core issue that emerged was bandwidth, and the realization that satellite-based Internet users—like Internet users everywhere—have a voracious appetite for more of it.

But the bandwidth that ViaSat could …Next Page »

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NanoString Technologies, the Seattle-based developer of genetic analysis tools, said today it has named William Young as its new executive chairman. Young is the chairman of Cambridge, MA-based Biogen Idec (NASDAQ: BIIB]), and formerly was chairman and CEO of Monogram Biosciences, and chief operating officer of Genentech. NanoString is still seeking a permanent CEO to replace Perry Fell, who retains a board seat, according to a company spokeswoman.

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RainDance Technologies, a Lexington, MA-based microfluidics company, has appointed Sirshendu Roopom Banerjee as its new president and CEO, the company announced today. Banerjee most recently served as director of healthcare investment banking at Leerink Swann and succeeds RainDance CEO Christopher McNary, who has taken the position of chief commercial officer at the company.

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Fragile X syndrome is the second leading cause of mental retardation, after Down syndrome. Caused by a defect on the X chromosome, the syndrome affects boys more frequently and severely than girls; one-third of men with Fragile X are autistic and have trouble with communication and social interaction.

There is no cure or specific medical treatment for the genetic condition—at least not yet. Drug companies large and small, spurred by recent discoveries in neuroscience, are now working on possible treatments.

Among the more intriguing companies to enter the hunt is aFraxis, a San Diego startup backed by Avalon Ventures. The company, led by Avalon partner Jay Lichter, is leveraging discoveries from the lab of Nobel laureate Susumu Tonegawa of MIT to develop a pill that might reduce or reverse the brain abnormalities and related behavioral symptoms of Fragile X.

Lichter agreed to talk with me last month about aFraxis, but missed our appointment. His assistant explained that Lichter was dealing with a company emergency; she said his schedule was so jam-packed that he couldn’t speak with me until sometime in March.

Fortunately, my colleague Luke had a conversation with Lichter in mid-December and shared some of his notes with me. So here’s what we know about aFraxis so far.

The company was formed in 2007, the same year Tonegawa’s research in Proceedings of the National Academy of Sciences (PNAS) identified a possible drug target for Fragile X. That target was PAK, an enzyme that affects the number, size and shape of connections between neurons in the brain.

In people with Fragile X, these connections-small protrusions called “spines” on the branches of neurons-are longer, thinner and more abundant than in people without the condition. When Tonegawa inhibited PAK in mice that had been genetically alerted to have the symptoms of Fragile X, the spines became …Next Page »

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[Editor's note 2/3/10, 3:15 pm: Robert Kibble, who conducted the chat with Frank Quattrone at this event, took issue with aspects of this story. See comments below.]

At a time when the IPO market appears to be loosening a bit, controversial former investment banker Frank Quattrone appeared before a regular meeting of the San Diego Venture Group—and he had a lot to say about today’s outlook for IPOs.

Despite a promising increase in the pipeline of IPO deals, Quattrone told the San Diego crowd, “The IPO market is structurally damaged.” In contrast to the deals Quattrone saw in the late 1980s and early ’90s, when “some of the biggest names in the tech business were taken public by a small firm for less than $10 million,” Quattrone says a typical IPO these days seems to require big numbers and big-name underwriters, “including three co-managers and seven book-runners.”

Addressing the startup CEOs and VC partners in the audience of roughly 450 people, Quattrone said, “You guys think the only ones worthy of running your IPOs are Morgan Stanley and Goldman Sachs.”

Quattrone, who was Silicon Valley’s star banker for more than 15 years, said he yearns to return to a simpler era that existed before the tech boom of the late 1990s escalated into a casino mentality of ever-larger deals. He talked nostalgically about joining Morgan Stanley in 1977, when it was a private partnership with a thousand employees that provided only financial advisory services. Quattrone said that’s what he hoped to recreate when he founded Qatalyst Partners, a small merchant banking firm in San Francisco on March 19, 2008—”two days after Bear Stearns sold for $2 a share.”

In essence, Quattrone told the crowd the financial industry grew too large and too over-extended—with too many VCs and too many underwriters on too many deals—at a time when too many big investment firms had leveraged themselves at 30 or 40-to-1 on borrowed capital. He now predicts that the venture capital industry is going to shrink, “and only the best funds are going to survive.”

Quattrone’s star began shining brightly in 1995, when …Next Page »

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