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Innovation Economy

Coming attractions in life sciences

Sector has plot twists aplenty if you know where to look

By Scott Kirsner
Globe Columnist / July 4, 2010

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There are two dangerous words which, deployed with the best of intentions in a newspaper column, reliably cause the reader to stop with a screech.

Life sciences.

Talk of drug development and DNA summons up bad memories of high school chemistry labs and all-nighters spent cramming for biology midterms. (Confession: I was barely a C student in both subjects.)

But New England is the global leader in the sector, and so it’s worth understanding a bit about the industry’s dynamics, even if you don’t work with 1,536-well microtiter plates all day. It’s an industry not only generating jobs here, but also new products intended to keep us healthy and living longer (ideally without bankrupting the health care system in the process).

To echo the summer movie ads: If you read just one column about the life sciences this year, make it this one.

When I talk about the life sciences industry in our neighborhood, it includes everything from university research labs to major global drug companies like Novartis AG that develop new products here to makers of medical devices like Boston Scientific Corp. to hospitals where new treatments are tested to hometown drug makers like Alkermes Inc., a publicly traded Cambridge company that makes injectable drugs used to treat conditions like alcoholism and schizophrenia. Supporting the formation of new life sciences start-ups are wealthy “angel’’ investors and venture capital firms. And working to improve the efficiency of the health care system by weaning it from paper-dependency are a number of e-health care companies like publicly traded athenahealth Inc. of Watertown.

So far, 2010 has been a tough year for the industry. The bad news first, followed by some reasons to be optimistic about the future.

The state’s biggest biotech is Cambridge-based Genzyme Corp. The company makes extremely expensive drugs for extremely rare diseases (Genzyme’s drug for Gaucher disease, a sometimes-fatal enzyme deficiency, can cost upwards of $300,000 a year per patient). Contamination problems at the company’s production facility last year created drug shortages for patients and gave competitors an opening. In May, the Food and Drug Administration fined Genzyme $175 million, and the company agreed to be supervised by the federal agency for at least seven years.

At Biogen Idec Inc. in Cambridge, the state’s second-biggest biotech, there hasn’t been a top research-and-development executive in place since Cecil Pickett retired more than a year ago. In January, chief executive Jim Mullen said he planned to retire, under pressure from the billionaire investor Carl Icahn, who’d criticized the company’s financial performance and its track record of delivering new drugs; Biogen’s top-selling product, Avonex, treats patients with multiple sclerosis.

The stock market doesn’t seem eager to welcome new life sciences companies, which gives big pharmaceutical companies a negotiating edge when they’re considering an acquisition: If an initial public offering isn’t a possibility, a purchase is the only way for a small company’s investors and founders to cash out, and few companies have the money to take a new drug all the way down the field from discovery to FDA approval on their own.

Changes in how the FDA approves new drugs and devices also have some in life sciences worried. Investors in start-up companies, said Michael Greeley of Flybridge Capital Partners in Boston, “have an open-ended liability when you don’t know how much money or how much time or how many patients you’re going to need to enroll in a clinical trial before you can get a product approved. That’s the thing I find most disturbing.’’

Finally, to complete the cloudy picture, several of the venture capital firms that were once consistent backers of fledgling life sciences companies have been having trouble raising money to continue making investments. Oxford BioScience Partners of Boston has seen several of its partners leave, and Polaris Venture Partners of Waltham has raised $233 million out of a hoped-for $400 million fund; Polaris’s last cash hoard, collected in 2006, totaled $1 billion. MPM Capital, another big Boston firm that puts money into life sciences, is out knocking on doors trying to raise more money now.

OK, on to the rosier stuff.

Biogen Idec’s board named a new chief executive last week, and rather than being a suit, he’s a scientist. George Scangos earned his doctorate in microbiology at the University of Massachusetts, and he’ll presumably reinvigorate Biogen Idec’s new product development efforts, rather than just focusing on wringing more revenue from drugs already on the market.

All that construction at the intersection of routes 128 and 2 in Lexington will yield a massive research and manufacturing campus for Shire PLC, a British company. The company is expected to employ about 1,500 people in Massachusetts by 2015, according to a spokesperson. Interestingly, because of Genzyme’s manufacturing woes, Shire won a quicker approval of its own drug for Gaucher disease earlier this year.

A trio of executives who helped launch Sirtris Pharmaceuticals Inc., a Cambridge life sciences company developing drugs for age-related diseases, are launching a new venture capital firm called Longwood Founders Fund. So far, they’ve raised $73 million, but have yet to start making investments. Another venture capital firm active in Boston, SV Life Sciences, announced last week that it had raised $523 million for new investments.

And it’s hard not to be optimistic when you see some of the ideas that start-ups are cultivating. Cambridge-based Energesis Pharmaceuticals Inc., cofounded by a Sirtris alum, is working on new drugs for diabetes and obesity based on recent insights into “brown fat,’’ a kind of tissue in the body that burns calories very fast. Follica Inc., a company with employees in Massachusetts and Pennsylvania, is working on a drug-device combination that could stimulate the growth of new hair follicles. The company is based on a research observation that microdermabrasion commonly used in many cosmetic procedures can be combined with an already-approved drug to produce new follicle cells; the company isn’t yet predicting when a product might hit the market.

Perhaps most interesting for the needle-phobic is technology under development at Seventh Sense BioSystems in Cambridge. The company’s small TAP device will be able to take a blood sample and test it, using an array of tiny needles that can make a shallow and painless puncture in the skin. (The sensation of blood being taken feels like a light tap, instead of a poke.) Chief executive Doug Levinson said the diagnostics company could have a product on the market within two years, likely for diabetics who need to monitor blood sugar levels.

“I still think that when you talk to the big pharma companies, you hear that there’s a real thirst for innovation and really transformational ideas, as opposed to ‘me-too’ products,’’ said Daphne Zohar, founder of Boston-based PureTech Ventures, which helped launch Follica.

Luckily, wrangling scientific breakthroughs into marketable products is what the New England life sciences business is best at.

Scott Kirsner can be reached at kirsner@pobox.com. Follow him on Twitter @ScottKirsner.