When you build a fast-growing business, there are bound to be a few “oh shit” moments. Darrell Cavens, the CEO of moms-and-kids retailer Zulily, knows that feeling well.

Cavens runs one of the fastest growing startups in the Seattle area, a private-sales site that has amassed more than 5 million daily e-mail subscribers since launching publicly in early 2010. Today, Cavens says, Zulily has more than 300 employees and adds about 5,000 products to its site each day. Its headquarters includes 17 photo studios just to showcase the new product samples that constantly roll in.

But last summer, all that growth meant Zulily was facing some big problems. The company was selling more than it could get out the door, even though it had contracted with a Fortune 500 company to handle all of its shipping logistics.

“We said `Wow, we’re going to outsource this, it’s going to be great. We’re going to focus on the marketing and the merchandising, these guys are going to handle this,’” Cavens says. “Within five months, we blew them out of the water, to the point where they were busing in staff from around the country. They were bringing management in, they were bringing in their special operations engineering teams to come and figure out how the heck did they get in this situation.”

Zulily’s business is a twist on traditional e-commerce known as flash sales or private sales, a model also followed by upstarts like Gilt Groupe and Fab.com. These companies contract with suppliers to sell their products directly to a membership list, often offering significant discounts.

Private-sale sites typically focus on “curating” their product offerings, aiming for an affordable high-end brand. They typically don’t hold stock themselves, instead generating supplier orders as they accumulate demand from customers.

Zulily’s niche is clothing and products for babies, kids, and moms—a cute sun dress for your daughter, wall art for the nursery, sandals and heels for mom. By last summer, business was booming enough that Zulily had a week’s worth of customer orders sitting on its dock waiting to be sent out for shipping at the contractor’s distribution center.

Cavens, speaking at last night’s University of Washington’s Business Plan Competition, estimated the backlog was nearly 300,000 units deep. “So we sat down in August of last year and said, `Oh shit—we’re in a world of hurt,’” Cavens recalled. The cure was clear, he says: Zulily had to bring shipping in-house, and build its own fulfillment center.

The team charged with investigating that project came back to Zulily’s executives and said it would take a year. With the holiday season coming up and customers getting upset with shipping lags, Cavens and company said that wouldn’t cut it. The second estimate was eight months—also too long, he says.

“So we sat down and said, we want to hit Nov. 1. This was the end of August, first of September,” Cavens says. That was impossible, the team replied. But they Zulily’s leaders went down the list and tried to get each item done as fast as possible—getting a building, finding a software product to handle the logistics, and hiring all of the people to make it happen.

“This was a Friday. We went out on a Monday, hopped on an airplane, went and leased space in Reno, NV. We went and found a software solution by the end of the week. We hired a consulting firm the following week to help us staff, and we had 200 employees in Nevada with an operating fulfillment center eight weeks later,” Cavens says. “We then went and opened another fulfillment center 10 weeks later on the East Coast, just because we’re a little bit crazy.”

That’s the pace of an Internet-fueled consumer business today—if the entrepreneurs hit their target right, and get a little lucky. “It can be done. If you’re running fast, looking at how can you as opposed to how can’t you,” Cavens says. “It’s built in our DNA. It’s what we do every single day.”

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Why pay for produce to be trucked up from California when you’ve got rooftops that could be converted to greenhouses? That’s the question posed by UrbanHarvest, a startup company founded by two University of Washington students. And as of today, they’ve got a few thousand more bucks in their pockets to help make the dream a reality.

UrbanHarvest won the $25,000 first prize at last night’s UW Foster Business Plan Competition, an annual showcase for the best new ideas from business students in Washington state. UrbanHarvest also padded their winnings by picking up the $2,500 award for the best clean technology idea.

It takes a little more than that to get the concept off the ground—UrbanHarvest says a one-acre rooftop greenhouse can cost $3 million to build, including money to pay for the first year of operations. But it expects to revenues of more than $1.5 million annually from such an installation. The startup has been in talks with other local companies, including Microsoft, for greenhouses that could grow lettuces and other fresh produce.

UrbanHarvest’s blueprint is to install hydroponic growing systems, which use water and nutrient baths rather than soil, on the tops of flat-roofed buildings. The company says those hydroponic greenhouses cut the need for pesticides and herbicides, and use 25 percent of the fertilizer, 10 percent of the water, and 5 percent of the land needed to produce the same amount of produce.

Among the benefits to business customers are the ability to grow food for their employees nearby, cutting the expense and pollution inherent in ordering food to be shipped from longer distances.

The other finalists at last night’s competition were:

—Xylemed, a software startup that aims to replace the whiteboards used to track hospital patients. Yes, what you’ve seen on TV dramas is still sometimes true: Nursing supervisors use a hand-written markerboard to keep track of the current roster of patient names, doctors treating them, procedures they’re undergoing, and even critical contact information. Xylemed hopes to bring this into the 21st century with a software application that can replace all that scribbling and erasing. It’s already being used at several locations, including Harborview Medical Center and the Seattle Cancer Care Alliance.

—JoeyBra, a stylish undergarment that has a thin pocket sewn into its side to stash cash, ID, or even a cell phone. This one definitely gets the crowd’s attention, but there’s apparently substance behind that fun pitch—JoeyBra has already made some pretty impressive sales just based on initial press coverage of its idea. The target was initially deemed to be college women, who need a place to stash a few small items while out dancing but don’t want to lug around a bag. The startup is also working on a sports-bra version.

—Biking Billboards, a marketing startup that does just what it sounds like: attaches billboards to little trailers that can be pulled behind bicycles. The pitch is that this gives advertisers a way to reach potential customers in places where regular billboards either can’t reach or would be ignored. Biking Billboards says its success depends just as much on its riders as it does the message they’re towing—the bicyclists are trained to be “friendly brand ambassadors” while they ride. The startup has already won some business from T-Mobile, which paid the group to ride its message around Bellevue and the UW.

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San Diego Xconomist Evan Snyder has been called a “stem cell revolutionary” and is regarded as a father in the field of stem cell research. When we talked in his office at San Diego’s Sanford-Burnham Medical Research Institute, he told me he isolated the first neural stem cell in the mid-1980s, as well as the first human neural stem cell in 1998. Snyder’s team demonstrated the concept of stem cell pathotropism (the ability of stem cells to home in on injured or diseased regions of the brain) and helped to establish the concept that stem cells can be used to regenerate and repair diseased and damaged tissue.

He arrived in San Diego in 2003 to serve as a professor and director of the Stem Cells and Regenerative Biology Program at the Sanford-Burnham. He also is a scientific leader and researcher at San Diego’s new $127 million Sanford Consortium for Regenerative Medicine. While Snyder is focused primarily on basic research, he talked with me about the prospects for commercial development of stem cell technology—and how the much-publicized regenerative properties of stem cells, while holding tremendous long-term promise, will likely not be the focus of the first market successes. Our conversation, which I’ve condensed and edited, follows here.

Xconomy: My general impression is that much of the early promise and enthusiasm over stem cells has been dissipating.

Evan Snyder: I don’t think I would agree with that. I think there’s an enormous amount of promise.

X: I mean in terms of using stem cells in commercial applications.

ES: What the companies and the public thought was that it wouldn’t take any work, that you’d have a cell and you would sprinkle it with pixie dust and everything would get better. That was certainly unrealistic. It might have been fomented by scientists in the early days who were just totally enamored of the fact that you had cells that could read environmental cues and go down different pathways, and they seemed to do this based on their own intrinsic programming.

But the fine-tuning in the use of stem cells still comes down to really understanding the biology of the cell. That also entails understanding the biology of development, because … Next Page »

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On the iPhone, the first page of the home screen—the one you see when you wake up the device—has room for only 20 apps, counting those in the dock. The iPad home screen holds 26. For me, that means the home screen is prime real estate, reserved only for the apps I use most often. So it was a big deal when I decided earlier this month to demote Instapaper to a folder on page two and give its spot to Pocket.

This reborn reading app—which was known until April 17 as Read It Later—earned its coveted position by doing just about everything Instapaper does, but with some extra visual pizazz. And what is that, exactly? Once you’ve installed the Pocket plugin or bookmarklet in your desktop or mobile Web browser, you can save anything you find on the Web—an article, a video, a photo, a recipe, or even a cool pair of glasses at Warby Parker—to your Pocket account. Then later you can peruse it, sans ads and other clutter, using the Pocket app on your mobile device.

Along with Instapaper, Readability, Longform, Zite, Flipboard, and others apps, Pocket is part of a new generation of services that treat the desktop Web as a place to discover content, but let you shift your actual consumption of that content to a more comfortable time and place—i.e., when you’re vegging on the couch with your iPad, or standing in line at the grocery store with your smartphone.

Pocket founder and CEO Nate Weiner

I wasn’t a big fan of Read It Later. Its design was dark and ponderous, which meant its only big selling point was the fact that it worked on more devices than the other reading apps (there were Read It Later apps for iOS, Android, and the Kindle Fire). So I was all the more intrigued by the app’s remarkable transformation into Pocket, which has a far friendlier design and a clearer value proposition. (One problem with the old app was that it wasn’t obvious that it could be used to save videos and other non-textual items.) I wanted to get the behind-the-scenes story of the relaunch from Pocket’s founder and CEO, Nate Weiner, and I finally got a chance to visit him at the startup’s downtown San Francisco office this week. Our edited conversation is reproduced below.

What’s clear from our talk is that Weiner pays close attention to the changing habits of consumers on the Web, and that he hopes to position Pocket to leapfrog over the other time-shifting apps by making the “save for later” experience on Pocket as simple and compelling as possible. Up to now, explaining what the app does and how it relates to the desktop Web has been tricky. So even with a user base of 4.5 million people, the app is reaching “maybe only 1 percent of the entire available market,” Weiner says.

But the battle for the other 99 percent is being fought right now. As more people buy smartphones and tablets, the contrast between the noise, clutter, and commercialism of the desktop Web and the ease, comfort, and cleanliness of mobile app experiences will only grow more acute. So it’s really only a matter of time before time-shifting one’s consumption of Web content using apps like Pocket becomes as common as time-shifting one’s television viewing using a DVR. The question is who will be the new TiVo—the company that makes saving Web content so easy it’s no longer considered a geeky chore.

All of this is scary stuff for publishers, of course. They were just starting to figure out how to monetize content on the desktop Web when the advent of the iPhone in June 2007 changed everything about digital content consumption. (Weiner, now 28, built the first version of Read It Later that same summer, while holding down a day job at a Minneapolis Web design firm.) At Pocket, Weiner says, the goal is to find ways to turn the time-shifting habit into a plus for publishers, perhaps by offering them an inside look at the data the startup gathers about how people use and share content once they’ve “Pocketed” it. In the future, Weiner says, Pocket might even provide ways for publishers to sell content or advertising through the app. (Pocket doesn’t currently show ads, and wouldn’t until there’s a fair way to share the revenue with publishers, Weiner says.)

Pocket has hired Mark Armstrong, the founder and head curator at Longreads, as its editorial director, and part of his job, according to Weiner, is to reach out to publishers and explore the various options for cooperation. “Right now there is no silver bullet, and the most important thing for us to be doing is to experiment and see what works and what doesn’t,” Weiner says. He says he’s acutely aware that the fortunes of Pocket, which is now eight employees strong, ultimately rest on the health of the content industry: “If [we] don’t figure it out, there will be no content to save, because nobody will be writing it.”

Here’s the full interview.

Wade Roush: From what I’ve read, you’d been planning the rebranding for a long time—actually, ever since you closed Read It Later’s $2.5 million Series A round back in early 2011. What was the thinking behind the change?

Nate Weiner: Yeah, I knew that we needed to rebrand by that time. For one thing, we had launched this feature on Read It Later called Digest. With Pocket, we have killed it off, but it was a magazine-type view that would auto-categorize things. I learned pretty quickly from that that people didn’t care about the categorization, but the thing they liked was the view. So I knew that the visual piece had to be brought forward a lot more. But more important, … Next Page »

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The recent Facebook IPO has brought to the front pages an issue that many ordinary investors have been asking themselves for a long time: “Is the system fair?” In Facebook’s case, legitimate questions have arisen about why Morgan Stanley, Goldman Sachs, and J.P. Morgan, Facebook’s lead underwriters, all reduced their internal revenue estimates for that company prior to its IPO while investors outside of these three banks were told nothing about it. As Henry Blodget explains here, these circumstances raise serious questions about the practice on Wall Street of selective disclosure and the fairness of the overall system. In other words, were these banks (and subsequently their clients) told something that other investors were not?

This question, and an experience that happened to me this week, bring to mind another long-held practice on Wall Street that I think is equally questionable and seriously outdated. It’s the practice of banks holding private calls with company management teams for a select group of investors. Here is what happened:

This week, a website called theflyonthewall published an alert that Dendreon CEO John Johnson would be participating in a conference call hosted by J.P. Morgan as part of their “CEO/CFO Conference Call Series.” While I follow the company very closely, this was the first I had heard of this. I wasn’t even sure at that point if it was just a rumor or not. Subsequently, I learned that J.P. Morgan also previously distributed a schedule of such calls, presumably to their private clients.

Now before I go any further, let me make a few important disclosures. 1) I have been extremely critical of Dendreon’s management team and their disclosure practices in the past, so much so that I publicly lobbied for the ouster of its prior CEO and Chairman. 2) In this case, I do not mean to pick on Dendreon or its new CEO specifically because this is a practice that is rampant in the industry. Dendreon is just one of many companies who participate in these calls. In fact, I think Mr. Johnson is very honorable, ethical, and a breath of fresh air at Dendreon. I believe the company has a bright future with him at the helm. I only bring up this case for illustrative purposes because it specifically happened to me this week, and in light of the recent Facebook news. 3) J.P. Morgan is a great bank and they have a world-class biotech team. This is an industry problem, not a J.P. Morgan one.

After seeing this investor alert, I emailed Dendreon’s investor relations team, asked them if it was indeed true that the CEO would be holding an investor call and, if so, may I please have the dial-in number. Like many investors, I was interested in hearing what kind of updates or advice Mr. Johnson had to report. Dendreon Investor Relations replied with the following message, “Hi Brad, this is true, however the call is for clients of JPM and I’m not at liberty to provide the call info.” It does not get any more straightforward than that. Dendreon’s CEO had an hour of his time to give to investors, but apparently only investors who are clients of a specific institution. J.P. Morgan, by the way, has been either the lead or joint underwriter of multiple debt and equity offerings for Dendreon in the recent past.

Now let’s set Dendreon aside, because again, this is a practice that many, if not most companies participate in. As an individual investor, I believe these types of selective and private calls need to be opened up to all comers because otherwise they are blatantly unfair. In truth, it is impossible to know in advance if material information will arise during a call. It is one thing to hold a private call with an outside expert who has a relationship with the bank, but it is something entirely different to hold one directly with a company’s management team.

In fact, I believe it is so unfair that in my opinion even the banks themselves recognize this. For example, if you are ever awarded the “privilege” of being invited to one of these calls, you will notice the sleight of hand the banks sometimes use to cover their legal tracks. In the case of this J.P. Morgan event, during an opening legal remark they ask you to voluntarily jump off the call if you are not an “analyst.” However, clearly the call is for clients too because 1) Dendreon directly acknowledged that in their email to me and 2) the first thing the J.P. Morgan operator asks you upon calling in is, “Who is your J.P. Morgan salesperson?” They also forward you directly into the call after you have told them you are an investor. Why not just block “non-analysts” right from the start if it is so important?

Additionally, I would like to point out that other companies who have in the past participated in this same “CEO/CFO Conference Call Series” did see the value in full-disclosure and were motivated to put out a press release alerting everybody about it. For example, here is a link to a press release by Regeneron Pharmaceuticals. They were motivated to make sure that all of their investors could equally participate in their call. Bravo, Regeneron…this is the right thing to do. Unfortunately though, they are the exception, not the rule. In my opinion, other companies would be very wise to follow suit. Private meetings throughout the 1990s tech bubble led to so many material disclosures behind closed doors that it prompted the SEC to enact Regulation Fair Disclosure (FD) in 2000. The regulation is supposed to ensure all investors get material information at the same time.

The bottom line is that in this day and age, the practice of publicly-traded management teams holding private investor calls for only a select few should stop. All investors, no matter who they bank with or how much money they have, deserve as much of an equal footing in the market as possible…especially when it comes to information straight from a CEO’s mouth. This is not overly burdensome for the companies or the banks, and might actually even increase their business. All you would be doing is distributing the phone number of a call that is already happening in the first place, as Regeneron and others have done. A small investor’s money is just as good as the big guys, so they deserve to hear what is on a CEO’s mind as well.

Calls such as these are just one of the many reasons why so many individual investors feel that the system is unfair. Make no doubt, this is an important issue because it is this perceived unfairness that is keeping many people out of the market. At the end of the day, this hurts both trading volumes (which are at multi-year lows) and the veracity of our overall system. Let’s level the playing field. What is good for one set of investors should be good for all.

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Seattle’s RealNetworks (NASDAQ: RNWK) has agreed to pay $2.4 million to settle a lawsuit over deceptive marketing practices that Washington state’s attorney general says duped consumers into expensive monthly subscription fees.

Most of that money—$2 million—goes into a pool for paying restitution to consumers. People who think they were improperly billed by the company can file a claim for repayment. The balance of the money goes to pay for attorney’s fees.

State Attorney General Rob McKenna—also the Republican candidate for governor—said the problems stemmed from free trials of products or services that quickly or deceptively signed consumers up and then switched them over to paid versions. McKenna also said consumers complained that it was very difficult to get RealNetworks to stop any monthly charges. The state attorney general enforces Washington’s consumer protection laws, and fields complaints from consumers.

RealNetworks’ new president and CEO Thomas Nielsen, who is attempting a turnaround at the company, noted in a statement that Real had previously stopped employing “the practices at the heart of this matter.” While Real disagreed with the entirety of McKenna’s legal complaint, the company said “we acknowledge that some aspects of RealNetworks’ e-commerce practices were not what our customers expected of us,” Nielsen said in a statement.

McKenna said Real’s changes had decreased the volume of complaints to his office. The restitution pool covers people charged from 2007 to 2009. Consumers can register a claim at realnetworksrestitution.com.

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Amazon.com’s remarkable growth is remaking the face of downtown Seattle, on a scale far different than any company before it in this city. Today, the e-commerce and cloud-computing pioneer felt some of the growing pains.

Amazon’s annual shareholder meeting devolved into a bizarre standoff with liberal political activists, who hijacked the typically staid gathering to address working conditions in the company’s shipping warehouses, its climate change policies, and its tax bill, among other things.

In the end, several protesters (led by a former union lobbyist) linked arms and shouted slogans, forcing the Seattle police to haul them out of the meeting, back into the arms of a cheering crowd of fellow protesters outside.

From his place at center stage, founder and CEO Jeff Bezos seemed to watch the antics as if an alien species had landed in the room.

He stood onstage, head cocked to the side, as the made-for-news-media spectacle unfolded. Once the noise died down, Bezos made sure he got the last word: “l’d like to thank all of you for coming, and we’ll see you next year.”

He can expect more of these clashes. Seattle is an extremely liberal city, the heart of the fourth most-unionized state in America. Amazon is a huge corporation headed by a famously libertarian founder. And the clash between the two will only be amplified because of Amazon’s nature as a technical and numbers-based business, not a touchy-feely, human company.

While the protesters were stirring emotions and rallying a crowd, Amazon responded with facts and figures. Knowing that activist shareholders had packed the room, Bezos began his presentation with a lengthy slideshow showing off different numbers that he said told the story of the company.

$79: The price of an Amazon Prime membership, which hasn’t changed since it debuted seven years ago even as features and goodies have been added. “I challenge anyone in this room to show me a better bargain in the history of shopping. If you can, I will try to hire you,” Bezos said.

45,000: The number of employees that Amazon has added since September 2008, the beginning of the Great Recession. “It has tripled the size of Amazon’s employment in that period,” he said.

$1.3 billion: The amount of corporate and payroll taxes the company has paid in the last two years.

$52 million: The cost of retrofitting Amazon’s shipping warehouses with air conditioning. Amazon was hit hard by recent reports that some warehouses weren’t equipped with AC, making conditions dangerous for workers in the summer months. “We’re going back in time and retrofitting our prior fulfillment centers. This is completely unusual in the warehousing or distribution business, so we’re really leading the way here,” Bezos said.

And yet, despite the care taken to bat down the protesters’ message, the meeting had a paranoid feel to it.

There was no webcast of the event as in years past, which lets shareholders, analysts, and reporters participate even if they’re not in Seattle. Reporters were not allowed to take video or still photos inside the meeting, presumably to keep the protesters inside from playing to the cameras too much.

Audio recording was also banned, which seemed excessive—why not give the media a chance to get all of the quotes right? Reporters were constantly accompanied by minders, and some of them were using the in-ear speakers and wrist microphones you expect to see on Secret Service agents. Uniformed cops were everywhere, and security was just below airport-and-courthouse grade, with metal detectors and bag inspections at the gate. Shareholders had to present ID and documentation of their stock holdings to get in.

Amazon probably had no choice on some of the security measures, since Seattle was one of the cities that saw some of the same “99 percent” protesters destroy property and clash with police earlier this month. And by the end, you almost felt sorry for the executives and workaday shareholders who had to sit through rants that were increasingly disconnected from the serious tax policy and worker safety questions that Amazon should answer.

But the tension in the room was real. You could almost feel two parts of Seattle pulling against each other, the community activists versus the technocratic capitalists. Eventually, they’ll learn to live together—there isn’t much choice there. But they’re bound to have a few more crazy spats in between.

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Sometimes when a drug hits the market, it can take on a life of its own. Researchers start using their imaginations—and their own grant money—to pursue applications the drugmaker itself might never have envisioned. And sometimes, those researchers make important new discoveries, which can provide the company with a running start on a potentially lucrative opportunity.

One of those stories is happening now at Seattle Genetics.

The Bothell, WA-based cancer drug developer (NASDAQ: SGEN) said this month that it is pushing ahead with the final stage of clinical trials to test its brentuximab vedotin (Adcetris) for patients with cutaneous T-cell lymphoma (CTCL). The company agreed to invest in the 124-patient study after seeing that researchers, operating independently at MD Anderson Cancer Center and Stanford University, both ran trials suggesting the Seattle Genetics drug could be an important new advance for CTCL. If the company and its partner, Cambridge, MA-based Millennium Pharmaceuticals, can confirm what the researchers saw in those smaller trials, then it could pave the way to an FDA approval of the drug for a third type of lymphoma. That could open the door to treating another 1,000 new patients a year in the U.S., expanding the number of people eligible to get the drug by about 35 percent.

Cutaneous T-cell lymphoma comes in a lot of different forms, and although it doesn’t usually kill people, it is painful and disfiguring. It’s a disease in which cancerous immune system cells migrate to the skin, causing nasty lesions. There are a few treatments out there, such as topical immune suppressors, radiation, or chemotherapy. There are also more targeted drugs like Eisai Pharmaceuticals’ bexarotene (Targretin), Merck’s vorinostat (Zolinza), or Celgene’s romidepsin (Istodax). But once patients progress past the early rounds of therapy, no treatments have shown tumor shrinkage rates beyond about 35 percent, much less an ability to spur long-term remissions. The Seattle Genetics drug, in the hands of the Stanford and MD Anderson researchers, boosted the response rate up to more than 65 percent, and in one study showed the remissions lasted at least six months and counting. That’s the kind of data that prompted Seattle Genetics to make CTCL one of its more promising new corporate R&D priorities.

Seattle Genetics CEO Clay Siegall

“We’ve talked to the doctors extensively, and we are thrilled with the activity they are seeing,” says Seattle Genetics CEO Clay Siegall. “This is the most active drug in CTCL they’ve ever seen.”

Seattle Genetics won FDA approval for brentuximab vedotin back in August, originally as a treatment for relapsed forms of Hodgkin’s lymphoma and anaplastic large cell lymphoma (ALCL). But for years, the company has seen those two conditions as just a starting point. The drug is designed to hit a marker known as CD30 on the surface of cells. Hodgkin’s and ALCL are known to carry the CD30 marker, so there was a good scientific rationale to try the drug first on those patients.

What was less clear to Seattle Genetics, or anybody else, was just how many other cancers have CD30 markers on them, or how prevalent the CD30 markers need to be for the new drug to make a difference. Basically, once Seattle Genetics proved that it had a hammer for CD30, scientists suddenly started looking more aggressively for that nail. Published literature says about half of CTCL patients have tumors expressing the CD30 marker, which made it appear worth exploring, but not necessarily a slam dunk for Adcetris to show anti-tumor activity. “We spent time looking, but the literature was kind of sketchy,” Siegall says. “Before Adcetris was approved, nobody cared that much about CD30.”

Now, the race is on to find CD30 on all kinds of tumor types, and cutaneous T-cell lymphoma is just now emerging as one of the promising new uses. There are so many … Next Page »

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SocialEyes, a startup with roots in RealNetworks and financial backing from Bellevue, WA’s Ignition Partners, is changing directions.

The company unveiled a group video-chat service tied to Facebook just last spring. But the startup left that product in the dust a few months later, after realizing there wasn’t a clear path to making it work on mobile devices, CEO Rob Williams says.

First of all, the Web browser-based video chat service was built around Adobe’s Flash software, which famously doesn’t work on Apple’s iPhone platform—a pretty big strike against a mobile strategy, and one that SocialEyes found too daunting to engineer around.

Secondly, Facebook’s user sign-in hadn’t become a widely used tool for mobile users, part of the social network’s larger struggles to expand its footprint into mobile. And all the while, SocialEyes was seeing mobile growth explode, Williams says, knowing that’s where it needed to be to really make a dent.

So, after tapping its video chat user base for market research and taking the plans back to its investors, SocialEyes jumped on a completely different idea: multimedia voice calling for smartphones.

The result is an application called Sidecar—quietly available on Android phones for some time, and just now showing up in the iPhone app store.

Sidecar tackles the idea that voice calls should be reinvented from scratch for the smartphone age, incorporating the galaxy of communication and computing tools that those devices now boast.

“All of the innovation on your smartphone really has been on the data side of the phone,” Williams says. “The voice call really hasn’t changed since we moved from wired phones to feature phones to smartphones.”

Right now, the actual phone part of your smartphone is still stuck in a separate part of the device, used mostly for voice calls (and, in some cases, video calling). Using the phone’s other elements requires a fair bit of scrolling around inside the device—grabbing photos or locations to share, for instance, or looking up someone else’s number.

The Sidecar app ties all of those things together, making a phone call a much richer multimedia affair. Users can show each other live video of what they’re seeing, for example, or pull up an online map that shows both parties the destination where they’re planning to meet. Callers also can easily grab photos and contacts to send along to the person on the other end or send text messages. All of the digital goodies shared during the call are organized inside the app so they can be easily pulled up after the talking’s over.

Sidecar isn’t the only company aiming at this target. The most direct competitor I could find is Thrutu, a very similar idea that Xconomy’s Wade Roush has profiled. You could also zoom out to include other players in IP voice and video calling, like Skype, Tango, and Viber.

Importantly, Sidecar works across the two most popular smartphone platforms, iOS and Android—meaning that iPhone users can call friends who have the app on an Android phone, and everything works together. You can’t get all of the features unless both callers have the app installed, but Sidecar can still place an Internet voice call over wifi if only one user has it in place.

One thing Sidecar doesn’t offer, curiously, is two-way video calling. There’s a video transmission element already built into the app with its “see what I see” video streaming feature, but that’s meant to let one caller show another the concert they’re at, or the part on the sink that they’re trying to fix, for instance.

Williams says that’s a question of quality and data use. If you’re offering two-way video calling, the app sucks up a large amount of bandwidth to essentially pipe relatively bland videos of static faces in two directions. Sidecar’s approach allows it to consume a much smaller ongoing slice of bandwidth for the voice call, with an uptick for a one-way video that’s of higher quality, and then back down to the voice mode.

“You never say never, but really we’re very much about sharing—to have the ability to tell people what’s going on where you are,” Williams says. Video calling, by contrast, is something “you pretty much only ever use to show your grandmother the kids.”

That’s not a bad point, but personally I still wonder why not offer video calling as an option. Perhaps it’s a matter of consuming too much bandwidth for a small startup, or of trying to differentiate itself from other offerings in the market.

But as many app developers have found, users can be incredibly fickle when it comes to their digital products, aggressively giving out bad ratings if an app doesn’t live up to their expectations—even if the product is totally free to use. As consumers, we’ve quickly come to expect it all.

Those are questions that will be answered down the road as Sidecar tries to amass a user base and get ahead in the race to redefine smartphone calling. Its predecessor company raised a total of about $5 million, with most of that coming from Ignition. The startup now has about 10 people on staff, spread between an office in Seattle and headquarters in San Francisco.

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[Updated: 9:20 pm PT] Only a few companies have ever been successful enough to call themselves Big Biotechs. If boards and shareholders lack vision and guts, we’ll look back in a few years and wonder why the Big Biotechs went extinct.

The group of Big Biotechs includes companies like Amgen, Gilead Sciences, Biogen Idec, and Celgene. They grew from scrappy venture-backed startups with a dream into big, independent, profitable, diversified enterprises. They have enduring ability to create new jobs and new medicines. They are like ballasts in a stormy industry.

There are several challenges in the market today that make it harder than ever to create companies like these. The biotech venture community can’t afford to build startups anymore that have Big Biotech aspirations; there’s only a lukewarm biotech IPO market; and Big Pharma companies have an endless appetite for acquisitions to replace their aging drugs with expiring patents. Wall Street values the short-term payday over long-term potential.

All of these factors are conspiring to put a lot of pressure on biotech companies to sell to Big Pharma companies. You’ve seen it with GlaxoSmithKline’s $2.6 billion hostile bid to acquire Rockville, MD-based Human Genome Sciences (NASDAQ: HGSI). San Diego-based Amylin Pharmaceuticals (NASDAQ: AMLN) is reportedly another object of Big Pharma desire. If these deals get done, they could end up tipping over a set of M&A dominos that would significantly change the biotech industry—and not necessarily for the better.

Richard Pops

“We’re at a unique moment in the history of the industry,” says Alkermes CEO Richard Pops. “When you look at the companies in the $2-plus billion market valuation tier, it is an incredibly important time and an incredibly vulnerable time. These companies are big enough to help to solve big problems in Big Pharma.

“If you are a Big Pharma company facing a patent cliff, you really have a huge revenue gap to fill, and small companies don’t really help you. They aren’t scaled to solve your problem. And this is precisely why companies in this valuation tier are so vulnerable. When you have a $2 billion valuation, it’s usually because something made your company an economic enterprise rather than a big science project.”

Pops runs one of the Big Biotechs. Rather than being acquired by a Big Pharma company that might want its technology that makes drugs last longer in the blood, Alkermes decided to do the acquiring. It bought Elan Drug Technologies, in a move that turned it into a trans-Atlantic 1,200-employee enterprise with revenue streams from multiple products—and a good shot at profitability for the long haul.

[Updated to add Ariad and Pharmacyclics.] A fair number of companies out there have some realistic chance to be members of the Big Biotech class. I count 23 companies in the NASDAQ Biotech Index with market valuations of more than $2 billion. Will they remain independent, like Alkermes, or go extinct? You can size up the list here yourself.

When I look at this list, a few things jump out. Amgen, Gilead, and others at the top have gotten so big and rich that someone would really have to move mountains to buy them. At the bottom of the list are a few little companies, like Vivus, that are surely built for quick and easy takeover. What concerns me more are the companies in the middle. They are the ones with compelling technologies, strong management teams, and at least … Next Page »

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To whom much is given, much shall be required.

Regular readers know that I’m not in the habit of quoting scripture. But this line found in the gospels of Matthew, Mark, and Luke has a bit of new relevance this morning, as Facebook’s initial public offering—valuing the company at $106 billion at the opening bell on the NASDAQ Exchange—begins a process that will turn hundreds of Facebook shareholders, including current and former employees, into millionaires.

The real windfall won’t come until later this year: lock-up rules mean insiders and other major shareholders can’t start selling their shares until three to six months after the IPO. But that’s actually sort of convenient, because it leaves these soon-to-be-tycoons some time to think about what they’ll do with their new resources.

Of course, there will be the inevitable, entirely reasonable burst of materialism. Silicon Valley’s realtors, travel agents, and Tesla dealers will experience a welcome bump in business. A lot of old Ikea furniture and Sony stereo equipment will end up on the curbs of Palo Alto, displaced by Ligne Roset and Bang & Olufsen.

But if Facebookers are anything like their predecessors at PayPal and Google, their new toys won’t distract them for long. They’ll eventually fan out across Silicon Valley and found their own startups, or start investing in their friends’ companies, or both.

“You are going to make hundreds of millionaires and see a lot of new startup activity, because these kids are going to start companies on their own,” says Vivek Wadhwa, a scholar of entrepreneurship with appointments at Stanford, Duke, Emory, and Singularity University. “It’s going to be a big boom for Silicon Valley.”

Now, if you only looked at the record to date, you wouldn’t get the impression that Facebook’s alumni are especially prolific—and you’d be forgiven for wondering if they have any interests outside of social networking, collaboration tools, and Web infrastructure technologies. With help from CB Insights, which has been preparing its own study of the “Facebook Mafia,” I did a search for companies founded by Facebook alumni, and turned up fewer than a dozen examples:

Asana (Web-based task management) – Dustin Moskovitz, Justin Rosenstein
Cloudera (Apache Hadoop distributions) – Jeff Hammerbacher
Cove (collaboration, acquired by Dropbox) – Aditya Agarwal, Ruchi Sanghvi
Daily Strength (online support groups) – Doug Hirsch
Jumo (social networking for non-profits, merged with GOOD) – Chris Hughes
MemSQL (database management software) – Eric Frenkiel
Path (social networking and media sharing) – Dave Morin
Peixe Urbano (Brazilian local commerce site) – Julio Vasconcellos
Quora (question answering) – Adam D’Angelo, Charlie Cheever
Storm8 (mobile games) – Perry Tam, William Siu
Trialpay (targeted advertising) – Eddie Lim

This isn’t a terribly long list, at least compared to the number of companies created by ex-PayPal people or ex-Googlers. But the real Facebook diaspora may only get underway six to 18 months from now, as the lock-up period expires and Facebook employees realize that working for a public company isn’t nearly as fun as working for a startup. An IPO is “like getting married,” Wadhwa points out. “The engagement is fun but after that you have all these responsibilities. Every quarter you are accountable to the public markets, and if anything goes the slightest bit wrong things get very nasty. The Silicon Valley kids won’t like it.”

So let’s say it’s early 2013 and antsy young engineers and product managers are leaving Facebook in droves and setting up their own companies. What big problems should they tackle? Or, as venture capitalist Michael Greeley put it yesterday, “What is to become of all this liquidity?”

It would be understandable, but disappointing, if ex-Facebookers only pursued the things we already know they’re good at. It’s clear that when you gather a team of star Stanford- and MIT-trained engineers, lock them in a room with a case of Red Bull, and give them some big-data problem—say, how to store and retrieve camera-phone photos from 800 million people—they can devise diabolically efficient algorithms to solve it. But how many more mobile social apps, enterprise collaboration tools, and infinitely scalable databases does the world really need?

The sad truth is that today’s startup founders swarm around a small thicket of opportunities in the cloud, mobile, and Web spaces. Even one of the valley’s leading iconoclasts, Y Combinator founder Paul Graham, occasionally seems to have trouble thinking outside the Internet box. As a sort of dare to rising entrepreneurs, Graham recently published a list of “frighteningly ambitious” startup ideas. But at least three of the ideas on the seven-item list—a new search engine, a replacement for e-mail, and a better delivery mechanism for digital entertainment—are just more of the same.

To make the most of their skills—and the long careers they have ahead of them—the coming crowd of Facebook alumni would do well to look outside Silicon Valley for problems to solve. Here are just a few of the ways they could profitably direct their brainpower:

Build untraceable communications tools for activists and dissidents. Twitter, Facebook, and text messaging worked great for organizers of the Arab Spring uprisings—until their governments caught on and started using the same tools to hunt them down. The assignment here: build a system that protects the user’s identity absolutely. Of course, any tool that helps dissidents could also be used by terrorists. Or could it? Figuring out how to favor the white hats over the black would be part of the challenge here.

Create a truly great, cross-platform customer service and support system. Part of being civilized means dealing with the bureaucracies in our lives, whether they’re our governments, our employers, our healthcare providers, or our ISPs. We need technologies that … Next Page »

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So here is my obligatory post on Facebook…which will be the most spectacular IPO of a venture-backed company in the history of mankind…and it just priced tonight.

The shares priced at $38 giving the company a market cap of $104 billion fully diluted, raising $16 billion in proceeds. Of the 421 million shares being sold, 57 percent (or 241 million shares) are being sold by insiders; in the past few years only LinkedIn and Pandora had a higher percentage of shares coming from insiders. Assuming the “green shoe” over-allotment option is exercised, the total amount of proceeds will exceed $18.4 billion. And this is where I want to focus.

Putting aside the potential negative signaling of all this insider selling—and General Motor’s voting with their feet (or tires) this week—what is the impact on the VC industry with all this liquidity? First—according to Fortune—some of the numbers:

—Individual shareholders (mostly Zuckerberg) are selling $3.2 billion of stock and will retain stock worth $27.7 billion

—Institutional shareholders are selling $8.3BN of stock and will still hold $15.8 billion

—This does not include the existing institutional investors (T. Rowe Price, Andreessen Horowitz) which hold about $1 billion of stock and are not selling, nor does it include all the other employees who are now fabulously wealthy

—Of the institutional investors, $5.1 billion of stock being sold is held by institutions which have traditional LPs and/or are themselves LPs. This same group of investors will still have $10.6 billion of Facebook stock yet to be sold.

For me what is most interesting is to speculate about what is to become of all this liquidity. The venture industry has struggled mightily to raise capital; in the past few years the VC industry has raised between $12 to $15 billion annually. As these proceeds are realized and distributed, do much of these dollars get recycled—that is, will underlying LPs begin to increase their allocations to VC as they start to see Facebook distributions? The math suggests that one year’s worth of VC fundraising is now in around half a dozen VC firms fortunate enough to have invested in Facebook!

Additionally, we are watching a very deep and wealthy pool of new angel investors get created and collectively they will play a powerful role in the next wave of great company formation. Much like the “PayPal Mafia” from the last decade which sponsored many of this cycle’s great companies, the Facebook Mafia should do the same over the course of the next decade. These individual investors themselves could become significant LP’s in many venture funds which, if that were to be the case, would further drive VC industry expansion.

Or is this just all wishful dreaming?

This essay originally appeared today on Michael Greeley’s blog, On the Flying Bridge.

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A few years back, molecular geneticist Tom Maniatis was approached by a Harvard Business School student with a heart-wrenching story. The student, Avichai Kremer, then 29, had been diagnosed with amyotrophic lateral sclerosis (ALS), otherwise known as Lou Gehrig’s disease. Kremer had an unusual idea: He wanted to advance ALS research by offering million-dollar prizes to scientists who made meaningful contributions to research into the disease.

Maniatis was both skeptical and intrigued. He had lost his sister to ALS, and was the longtime chair of the research and drug-development committees for the Amyotrophic Lateral Sclerosis Association. “The prize model had never been tried in life sciences,” says Maniatis, who is now a professor and chair of the department of biochemistry and molecular biophysics at the Columbia University College of Physicians and Surgeons (and one of our Xconomists). “At the time Avi entered the scene, the ALS community was pretty small. And the drug companies did not see it as a profitable pursuit.

As it turns out, Maniatis says, ALS was a perfect model for a prize-based research approach. In 2006, Kremer’s idea became Prize4Life, a Cambridge, MA-based nonprofit that is now one of the most influential forces in ALS research. In addition to offering a $1 million research prize each year—-the latest of which will be announced at a fundraising gala in New York on June 6—Prize4Life has spearheaded several programs designed to mobilize and energize scientists working in ALS. Kremer and a handful of his HBS classmates are running the entire endeavor, says Maniatis, who is a member of Prize4Life’s scientific advisory board. “They had such an affection and respect for Avi that many of them put off jobs to stay in Cambridge and work for this nonprofit,” he says.

Kremer and his classmates spent more than 1,000 hours talking to experts from the drug industry, academia, and nonprofits, before officially launching Prize4Life’s model. “What inspired me was the success of the Ansari X-Prize,” Kremer says in an e-mail, referring to the California organization that provides incentives to researchers in education, energy, the environment, life sciences, and exploration. “It proved to me that a prize can correct a market failure.” In Prize4Life’s case, he explains, that market failure is the lack of capital “to focus innovation coming from academia and small biotechs on ALS,” he says.

This year’s award will mark the third effort by Prize4Life to support ALS scientists with $1 million in research funding. In 2010, 33 teams of scientists—about half of whom came from academia and the other half from pharma companies—competed for the organization’s first $1 million award by proposing treatment protocols meant to extend the lives of mice with ALS by 25 percent. Ultimately, none of the teams met the goals set out by Prize4Life, and the $1 million prize went unclaimed, though several of the applicants are continuing their research with the organization’s support. (Prize4Life also sponsors a number of smaller research grants.)

Last year, Prize4Life awarded $1 million to Seward Rutkove, co-founder of Woburn, MA-based Convergence Medical Devices, for his work developing a biomarker that can measure the progression of ALS in patients. The tool is designed to make clinical trials of potential new drugs more efficient.

This year’s major prize will be a revival of the inaugural award’s goal—the promise of $1 million for research that demonstrates 25 percent survival in ALS mice. “In the previous round, no one was able to achieve that, but there are so many … Next Page »

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From the moment Dendreon started in business 20 years ago, most scientists have said that if its immune-booster for prostate cancer was going to work, it would probably work best at an early stage of disease, before tumors had gotten too powerful for the immune system to contain. Today, Dendreon is offering the latest slice of data that suggests that may be the case.

The Seattle-based biotech company (NASDAQ: DNDN) is announcing today a new analysis of its pivotal 512-patient study of sipuleucel-T (Provenge), which separated patients into four quartiles based on how high or low their prostate-specific antigen (PSA) scores were. The study wasn’t designed to get a statistically significant answer to this question, meaning the finding could be a fluke. Still, the results do align with what many scientists believe based on the history of clinical trials with the product—that it should work better among patients with less-aggressive forms of disease. The analysis, by lead author Gerald Chodak at Weiss Memorial Hospital in Chicago and colleagues, was posted online today on the American Society of Clinical Oncology’s website, in advance of its annual meeting.

“All of these analyses support the robustness of clinical benefit for patients, and this PSA quartile data is helpful for patients when you think about sequencing of therapy,” says Mark Frohlich, Dendreon’s chief medical officer. “The data strongly argues that using it as early as possible is the best for the patient and still allows you to go on and get other therapies.”

Dendreon won FDA approval back in April 2010 for the first-of-its-kind immune-boosting therapy, after the 512-patient study showed patients lived a median time of about four months longer on the drug than on a placebo, with minimal side effects. Since then, the company has faced a series of new competitive threats, particularly from Johnson & Johnson’s abiraterone (Zytiga) and Medivation’s enzalutamide. Those drugs are starting out by aiming to treat the sickest of prostate cancer patients, whose disease has worsened after getting chemotherapy. Dendreon’s drug is approved for patients with a less-severe form of disease, which hasn’t yet prompted them to go all the way to chemotherapy. Since prostate cancer is a slow-growing malignancy, part of Dendreon’s challenge is to persuade doctors to get more aggressive in treating patients early.

PSA, which isn’t a perfectly reliable marker, is still used almost universally by doctors and patients to track a patient’s progress. The lower the score, generally speaking, the better. In this analysis of the Dendreon study, researchers crunched the data to look at survival times of patients who entered the trial with PSA scores of less than or equal to 22.1; between 22.1 and 50.1; between 50.1 and 134; and over 134. As you can see from the chart below, Provenge patients lived longer than placebo patients in all four quartiles, but the difference in median survival times was the largest among those with lower PSA scores.

This isn’t really a surprising finding, given that Dendreon has previously said that patients with lower PSA scores had better outcomes on Provenge, about to a summary of the trial published in the New England Journal of Medicine. But it’s the first time Dendreon looked more closely at the PSA scores, by dividing patients into quartiles, Frohlich says.

Given how much debate there has always been about the data to support Dendreon’s prostate cancer drug, I’d love to hear readers thoughts on how meaningful the latest PSA analysis is. Do you think the consistency of the survival advantage in all PSA groups means something, or do you chalk this up to mere data dredging that does little more than stir up a new hypothesis? Let me know your thoughts in the comment section below.

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Ever get the feeling that social media services didn’t really think through the privacy and legal problems they might run into? Turns out, you’re probably right.

Del Harvey saw it firsthand. When she joined the fledgling company in late 2008, Harvey quizzed co-founders Biz Stone and Evan Williams about how they might handle spam. “And Biz was like, ‘You know, I don’t think it will ever really be a problem. I mean, you can choose who you follow,’” Harvey says. “And I was like, oh dear.”

OK, she thought—how are you guys planning on dealing with trademarks? “Biz was like, `We applied for one for Twitter,’” Harvey says. “And I was like, yes—and other people’s trademarks on Twitter? `Well, we’re not going to use them.’”

These days, things are a lot different. Harvey is Twitter’s director of trust and safety, where she oversees a team of nearly 40 people dealing with legal issues, user privacy, account abuse, and all kinds of other thorny problems.

Del Harvey

But that doesn’t meant engineers have always thought through the ways the tools they build might be misused, misunderstood, or twisted one they get out into the big, bad world.

When an engineer builds a new product, “They’re like, `Oh my God, I made this thing and it’s going to make kittens for everybody,’” Harvey said at the Privacy Identity Innovation summit in Seattle. “And you’re like, `Right, I see that it makes kittens. But did you see that it also shoots bullets?’”

In an era when new apps and services spread with viral speed, the tech industry’s builder-centric culture can collide with a huge base of “normal” users very quickly, generating reactions the product designers hadn’t considered.

As the privacy heads of Google+ and Facebook discussed yesterday, it becomes important for social media companies to have internal watchdogs over privacy issues. But many of these companies have been growing so quickly that the watchdogs can’t always keep up.

Earlier this year, Twitter was among the popular services criticized for accessing and storing smartphone-app users’ phone contact information without explicitly saying so. The company later changed its guidelines to make its procedures clearer, and the safety team realized it had to keep an eye on practices in this area. “What I learned from it was I needed to assign a person to that team, too,” Harvey told moderator Todd Bishop, co-founder of the Seattle tech news site GeekWire.

“We’re not necessarily the ideas people. We’re more of the dream-crushers, I think,” Harvey says of her group. Their work revolves around a fundamental question for Twitter’s developers: “How can we let you do this thing that is really awesome and amazing, and does in fact make kittens, while also removing this component of it that will be misunderstood?”

With more than 140 million active users, that’s a pretty big job. Consider the complexities of dealing with spammers, the source of many Twitter users’ aggravations when a hijacked account starts sending provocatively worded direct messages to other users.

The problem can be hard to get a handle on, Harvey says, because spammers are often several steps ahead. If they get a large chunk of usernames and passwords from an illicit source, a spammer might only target half of them for an initial attack. Twitter can stamp out problems on the profiles that it finds being abused, but there’s another universe of accounts ready to be exploited that the company doesn’t necessarily even know about, she says.

Users have to have some responsibility to be aware of their surroundings as well, Harvey says.

“A lot of what we’re working on is education,” she says. For example, she says, secure browsing—signified by ‘https’ in the Web address—is the default setting for Twitter’s webpage. “So when you’re going to sign in, double-check the address bar. If you’ve clicked on a [direct message] link and it takes you to a page where you have to sign in—why?”

To me, that sounds like a pretty high degree of sophistication to expect an everyday user to grasp, particularly since online scammers will always find another chink in the armor once their current routes get shut off. If services like Twitter can make it easier to see when you’re in shady territory, increasingly savvy users might be able to meet them halfway. But there will be plenty of work for people like Harvey—and maybe some more dream-crushers added to the arsenal.

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Doctors often ask themselves, after a leukemia or lymphoma patient gets high-dose chemotherapy, whether they really wiped out every last rugged cancer cell in the patient. That’s always been a difficult question, but now a team of Seattle researchers is showing they might have found a powerful new technology to consistently deliver that answer.

Scientists at the Fred Hutchinson Cancer Research Center, the University of Washington and Seattle-based Adaptive Biotechnologies are reporting they’ve found what could become a more clear and consistent way to spot “minimal residual disease” that doesn’t show up on imaging scans, but can be deadly. Researchers looked at blood samples from 43 leukemia patients who got high-dose chemo, and found that a new DNA sequencing-based technology was able to spot trace amounts of cancer in 22 patients. For comparison, the gold standard flow cytometry method was only sensitive enough to spot residual cancer cells in 12 patients. The detailed findings are being reported in Science Translational Medicine.

More accurate detection of “minimal residual disease” is important to cancer treatment, because it can influence a physician’s decision on whether or not another round of chemotherapy is really necessary for an individual patient. So if the Seattle scientists can go on to reproduce these findings in other cancers, it could open the door to a potentially lucrative new diagnostic line of business for Adaptive Biotechnologies, a company that has already made some headway by marketing its test to scientists.

“We’re excited, we think this is an important step in the right direction,” says Adaptive co-founder Harlan Robins, a computational biologist at the Fred Hutchinson Cancer Research Center and lead author of the study.

Harlan Robins

Researchers sought to get this answer through a new technology based on advances in DNA sequencing. Adaptive Biotechnologies, a Fred Hutch spinoff, was founded on the idea that while the 6 billion letters of DNA that make up a human genome are consistent in almost every cell of the body, the immune system’s B cells and T cells are an exception. In these cells, DNA gets shuffled around in wildly complex combinations, allowing T cells to recognize specific invaders, such as viruses and bacteria that people get exposed to over time, and enabling B cells to produce specific antibodies against those intruders.

Most of the time, those adaptations are what keep us healthy and able to fend off the wily pathogens in the environment. But sometimes those mutations lead to T cells or B cells that divide out of control, leading to leukemia or lymphoma.

To look for those nasty T and B cells, Adaptive has built a new kind of technology platform based on DNA sequencing, which it calls ImmunoSEQ. The company uses San Diego-based Illumina’s high-speed HiSeq DNA sequencing instruments, and it has custom chemical reagents and software that enable researchers to look specifically at DNA sequences of these variable T and B cells, Robins says. Adaptive found demand for this new technology from scientists looking to answer basic immunology questions. But there’s long been interest in extending this technology into a bigger commercial opportunity with diagnostics.

Adaptive is hopeful that today’s findings will help open that door to the diagnostic world. Flow cytometry, a technique that scientists have used for years, looks for certain biomarkers that can be found on the surface of cancer cells. While it’s not as sensitive at detecting rare cancer cells, that’s not its only weakness, Robins says. The technology isn’t easy to standardize from lab to lab, depends a lot on the skill of the technician running the test, and therefore is subject to human error. Adaptive’s bet is that its technology will be more automated, and easier to standardize, largely because it’s one of only a handful of organizations developing this sort of T and B cell genomic technology (San Francisco-based Sequenta is another).

Still, Adaptive has a ways to go before … Next Page »

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[Updated: 1:30 pm PT, 5/17/12] One of the big dreams in biotech over the past 35 years has been to make drugs that work like “smart bombs” by destroying tumors while minimizing collateral damage. Scientists have learned this is no easy thing, but now that a couple of these types of drugs have been shown to work, a new wave of companies is emerging to see if they can finally turn this vision into reality.

Targeted antibody drugs have been around for a long time, and have been shown to do a lot of good for patients. Some of the world’s best-selling medicines are designed to specifically hone in on cancer cells while mostly sparing healthy tissues. Yet it’s only been in the last several years that a couple of companies—Seattle Genetics and Genentech—have shown proof in clinical trials that they can go a step further than what’s been done with so-called “naked” antibodies. The concept is simple: Take a regular antibody, link it to a toxin, and design the combination so that it unleashes a killer payload on tumors. Done right, you ought to have a drug with more punch than traditional antibodies or chemotherapy.

The idea of making “empowered” or “armed” antibodies is known more formally in industry circles as the antibody-drug conjugate (ADC) business. Most previous attempts to amplify antibodies in the past failed because the toxins broke off and started floating around the bloodstream. That meant the drug never got to the right place, and the treatment caused similar side effects to standard chemotherapy. Seattle Genetics overcame that hurdle with the FDA approval last year of its lymphoma drug brentuximab vedotin (Adcetris). And Genentech is in late-stage trials of its souped-up version of Herceptin called trastuzumab emtansine (T-DM1). Both of these drugs have shown in clinical trials that they can be powerful anti-tumor weapons in very sick cancer patients. And not surprisingly, these successes have inspired a new group of genetic engineers to see what they can do to turn antibody-drug conjugates into mainstream cancer medicines.

“We as an industry now have a lot of experience with naked antibodies for cancer, and some of them are very good, but we know they aren’t perfect,” says Bill Newell, the CEO of South San Francisco-based Sutro Biopharma, a venture-backed startup. “They aren’t magic bullets. But I think as people recognize the valuable contribution antibodies have made to cancer, they naturally ask themselves, ‘how can we make them better?’ Essentially, antibodies are good, but antibodies with a payload may be even better.”

There is so much enthusiasm for the emerging antibody-drug conjugate movement that there’s even a World ADC Summit, now in its third year, scheduled for this October in San Francisco. Given the increasing interest among venture-backed companies that are seeking to come up with new antibody-drug conjugates, or provide new enabling technologies, I thought it would useful to put together a list of companies seeking to play a role. If I’ve overlooked a company you know of, please send me a note at ltimmerman@xconomy.com so I can update the list.

T-DM1. Image courtesy of Genentech

Genentech (South San Francisco). The biotech giant, part of Switzerland-based Roche, has the broadest and deepest experience with antibody-drug conjugates in the world. The company uses technology from Seattle Genetics and ImmunoGen in some cases to make ADCs, but it also has its own proprietary techniques which it doesn’t license outside the company. Genentech has had its most high-profile success with T-DM1, but that’s just one of 25 different antibody-drug conjugates in various stages of development, from discovery through late clinical trials. Nine of Genentech’s 38 cancer drugs in clinical trials—roughly one-fourth of the portfolio—belong to this new class of empowered antibodies. “We’ve really invested heavily in this technology and have the breadth and depth of our pipeline to show for it,” says Genentech spokeswoman Krysta Pellegrino. For a detailed rundown of Genentech’s ADC programs, click here.

Seattle Genetics (Bothell, WA). Seattle Genetics (NASDAQ: SGEN) is one of the two mainstays of the armed antibody field, along with Waltham, MA-based ImmunoGen (NASDAQ: IMGN). The company was founded in 1998 after Bristol-Myers Squibb closed down a Seattle research center that had been dedicated to developing antibody-drug conjugate technology. Besides its work on the new lymphoma drug Adcetris, the company lists six other empowered antibodies in clinical and preclinical development on its website. The company also licenses out its antibody-drug linking technology to other drug developers working on specific projects. The list of collaborators includes Genentech, Bayer, Celldex Therapeutics, Progenics Pharmaceuticals, Astellas Pharma, Daiichi Sankyo, Millennium:Takeda, GlaxoSmithKline, Genmab, Pfizer, and Abbott Laboratories.

ImmunoGen (Waltham, MA). ImmunoGen (NASDAQ: [[ticker:IMGN]) is the other stalwart of the empowered antibody world, having been founded way back in 1981. The company has never made a profit in all those years, and has had some very lean years, but it has been resurgent of late. That’s because it licensed its antibody-drug linking technology more than a decade ago to Genentech, which has used it to make T-DM1. That drug isn’t yet FDA approved, but it passed a pivotal clinical trial back in March, which was the last major milestone it needed to clear before seeking the regulatory green-light. ImmunoGen stands to collect a modest royalty on that product, and like Seattle Genetics, it seeks to use its antibody-drug conjugate technology for its own internal drug candidates, while also making some money by licensing it to other companies working on specific projects. Eli Lilly, Novartis, Amgen, Genentech, Biotest, Bayer, and Sanofi are among its collaborators.

Bristol-Myers Squibb (New York). The pharmaceutical company (NYSE: BMY), which once invested so heavily … Next Page »

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In today’s tech industry, builders rule. But there’s a real tension between creators—who want to use every tool at their disposal—and everyday users, who freak out when too much of their personal information gets vacuumed up and sprayed out into the world.

The privacy leaders at Facebook and Google+ say their companies are starting to get the message. At today’s Privacy Identity Innovation conference in Seattle, Google+ privacy head Anne Toth and Facebook privacy and public policy manager Rob Sherman discussed how the two tech giants are striving to give users more control over their privacy amid a dogged, industrywide competition for social data.

“I think people will start to make judgments when they use products, and they’ll start to say `I want the companies that I do business with to think about privacy and to give me the ability to make my own choices,’” Sherman said. “Facebook’s continuing to do that. I think a lot of the smaller companies, as well, are starting to think that way.”

Facebook, of course, has little choice in the matter. The social networking leader, which is set to hit the public stock markets in a few days, settled a federal complaint last year by agreeing to change the way users’ information is made public and submitting to 20 years of independent audits.

Google+, the search leader’s response to Facebook’s rapid rise in social networking, is very new—and nowhere near as popular. As the challenger, it has tried to build in some features that clearly stand apart from Facebook’s sometimes convoluted settings for how social information is shared. That difference is distilled in the Google+ design concept of “circles,” which lets a user visually sort online friends into different groups, and choose which of those groups gets to see any given activity.

Toth said Google’s approach is to give engineers freedom to build, with supervision from product leaders who are responsible for making sure users’ privacy is being considered.

“What’s interesting is, in an engineering culture, very often people want to launch something because they can,” she said. “There are a lot of examples that I’m seeing more and more of, where the ability to do something is not the driver of whether you launch a feature. It’s about whether you do it in a way that’s responsible, that meets user expectations. That’s more of a test, and I think that’s a certain sign of maturity.”

Keeping an eye out for user privacy isn’t just for the big companies that might wind up in federal regulators’ crosshairs, said Kevin Mahaffey, co-founder of mobile software security startup Lookout. When users can see what kind of data mobile apps and Web services are accessing, they can sound off through reviews to alert other consumers—and change developers’ behavior.

“Historically, there haven’t been a lot of market forces that push down collection of data. Because a lot of times, it’s a transparency issue—you collect data, either some or a lot, and the users kind of don’t know the difference,” Mahaffey said.

But when users are armed with standard disclosures about the data a program uses, and a feedback mechanism like the reviews section of an app store, that’s quickly changing.

“The developer, instead of just saying `Well there’s no recourse because the FTC doesn’t care about me, because I’m just one guy in a garage’ … Now, all of a sudden, my download numbers are going down because users don’t like me. That’s awesome.”

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Seattle startup Medify unveiled its medical-research service last year, aiming to give patients a window into the latest and best knowledge as they navigate the medical system.

The 10-person team will continue that work, but as part of a larger company following an acquisition by Alliance Health Networks, a Salt Lake City-based operator of health-focused social networking sites.

The two private companies refused to disclose the terms of the deal, but it sounds like a cash-and-stock transaction. Medify had raised $1.8 million from Voyager Capital and angels, and had been incubated at Voyager’s Seattle offices.

“We are a venture-backed company. When you’re that kind of company, you try not to sell too early,” Medify CEO and co-founder Derek Streat tells me. “So we only did this deal because we know that it’s a good deal. It’s a deal where all the investors make some money, plus have an opportunity to continue to share in the growth of Alliance as well.”

Streat was inspired to start Medify after his young daughter was diagnosed with a serious kidney disorder. Streat and his wife put in hundreds if not thousands of research hours, trying to understand the disease and how to manage their daughter’s care.

Medify tackles that same problem by mining the data contained in mountains of medical research, culling those studies for useful top-line indicators—what kind of drug or treatment was used, how effective it was, the number of patients in the study, and more. Patients can search through the data to find useful trends, dive deep into the results, and display them in custom data visualizations.

Medify had only been in a public beta version since last August, but apparently had the beginnings of a product and the technical chops that made Alliance Health Networks sit up and take notice. Alliance operates a group of 50 social networking sites, each revolving around a specific health condition—the first and biggest was dedicated to diabetes patients, giving them a place to discuss treatments and other issues. Alliance says its sites now have about 1.5 million members.

Alliance has raised at least $14 million in venture financing in its lifespan, including an $11 million round last summer. It plans on keeping Medify available as a standalone service, and all of the employees are joining Alliance as its new Seattle office, where they’ll also work on new data-mining and analysis projects for the combined company.

There could be some really interesting insights in that work. Streat and Medify co-founder Jay Bartot see a lot of possibilities in analyzing the unstructured data generated by active communities of patients on Alliance’s social sites, along with additional structured sets of data, such as insurance claims. That could yield all sorts of information that would be valuable to medical companies seeking to market medicines and devices to patients when they really need them.

Streat says that could help solve what he sees as a lingering “black box” approach to some elements of healthcare, where patients don’t know exactly what to ask for or whether a treatment is the right thing for them.

“The best way to think of what we’re doing at Medify and Alliance is, you’ve got a significant health situation to deal with, for you or your family. What do you want to know?” Streat says. “Well, I want to know what guys at Stanford think, I want to know what other patients think, and I want to know what doctors are prescribing. I want to know the facts.”

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Theraclone Sciences has taken its first step ahead toward showing it might have an antibody drug that could work in humans.

The Seattle-based biotech company is announcing today that it passed its first clinical trial with an antibody drug designed to fight a wide variety of flu strains. The study randomly assigned 40 healthy volunteers to get a dose of Theraclone’s TCN-032 or a placebo. Researchers found that the treatment was safe and well-tolerated at all five doses studied, didn’t appear to cause any serious side effects, and didn’t provoke an immune reaction against the drug.

“This study exceeded our expectations,” says Leni Ramos, Theraclone’s chief medical officer.

Leni Ramos, Theraclone Sciences' chief medical officer

Theraclone plans to release more detailed results at a future scientific meeting, which will include strategically important information on how long the drug lasts in the bloodstream. And today’s study results don’t say anything about whether the drug is effective at killing flu viruses in human beings. But the results are promising enough that the company plans to take the next step in clinical trials, advancing to a mid-stage clinical trial later this year in which the drug will be tested among people who get exposed to flu virus in a carefully controlled environment. That study will be placebo-controlled, and is being designed as the first to establish biological proof in humans that TCN-032 can effectively kill the virus, Ramos says.

While there are already a couple of antiviral pills on the market—Roche’s oseltamivir phosphate (Tamiflu) or GlaxoSmithKline’s zanamivir (Relenza)—scientists worry about mutant strains like H5N1 “bird flu” that could emerge and resist today’s antivirals. Even without some mutant supervirus in the air, an estimated 200,000 people are hospitalized in the U.S. each year with flu, and 36,000 people in the U.S. still die from annually. Most are elderly, young children, or those with weakened immune systems.

Theraclone, founded in 2005, has spent years working to get to this point by developing its technology for discovering “broad-neutralizing” antibodies. Theraclone has shown in the lab that it can find antibodies that can fight a wide variety of infectious invaders, from HIV to flu to cytomegalovirus (CMV). Japan-based Zenyaku Kogyo helped finance the anti-flu antibody work, and it retains commercial rights to the Theraclone product candidate in Japan. Zenyaku remains committed to support further development, Theraclone CEO Cliff Stocks says.

Exactly how such a flu antibody might be used, in practical terms, is still an open question. Since Theraclone’s antibody is given intravenously, it’s not the kind of flu-fighting product people will ever get at their neighborhood Safeway. But it could be valuable to hospitals looking to have a potent anti-flu weapon on reserve for tough cases, and for public health officials, who may want to stockpile it in case a particularly nasty pandemic flu strain emerges.

Theraclone isn’t the only company out there with visions of creating a potent antibody drug against flu. Netherlands-based Crucell, acquired last year for $2.3 billion by Johnson & Johnson, has said it is working on a “universal antibody” for flu. It has said that its antibody candidate is designed to hit the hemagglutinin protein that appears on various flu viruses.

Theraclone’s program is different in a few key respects, Stocks says. For starters, Theraclone believes it is ahead in development, since the Crucell program is thought to still be in preclinical development. Second, the Theraclone antibody is made to hit a different target on flu viruses, known as matrix 2 protein (M2e). That distinction is important because an estimated 98 percent of flu strains contain the M2e region in their DNA. Viruses can easily mutate when confronted with a powerful new drug that threatens their survival, but Ramos says if flu viruses mutate away from the assault of Theraclone’s TCN-032, then they would lose their ability to be infectious.

The next study will say a lot about whether Theraclone has a real drug it will be able to sell, and it won’t have to wait eons for the answer. The next study will be based on volunteers getting a single dose, and since the antibody is designed to last several weeks in the bloodstream, it won’t need to be given in repeat doses over time to prove it’s effective against the virus, Ramos says.

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