Another one bites the dust.

The saga of Precision Therapeutics, a Pittsburgh biotech developing what struck me last August as a particularly crude type of cancer-chemotherapy diagnostic, continues apace. In a tersely worded press release, the special-purpose acquisition company Oracle Healthcare Acquisition said it has terminated its planned merger with Precision. The release blamed “currently prevailing market conditions” for the decision, which carries some fairly ominous consequences for both sides.

Oracle’s plight is fairly simple: The blank-check company will now dissolve itself and return the money it raised, minus expenses, to investors. For Precision, however, the outlook is much starker. The merger would not only have taken the company public, it would have left Precision with $120 million in cash, ample resources to bolster sales of its ChemoFx test and to develop new potential products.

Now, after getting jilted at the altar by Oracle and withdrawing its IPO, the startup is most likely almost out of cash. As of September 30, Precision had only $15.6 million in cash and cash equivalents and a working-capital deficit of $1.1 million against debts of $17 million — plus a burn rate of roughly $3 million a quarter. Those numbers don’t look good by any measure

The first real sign the merger was in trouble came just about two weeks ago, when Oracle and Precision effectively cut the overall size of the deal by 15 percent — never a good sign. Oracle’s decision to walk away remains murky to me given the complexity of the deal, and external market events might have somehow triggered provisions that made the acquisition untenable. But I can’t help wondering if the buyers may have simply concluded that Precision’s prospects weren’t at all what they once thought.

TODAY’S HEADLINES:

• Precision Thera merger with “blank check” Oracle Healthcare collapses (release)
• Sleep Solutions takes in $21M for sleep-apnea diagnostics (release)
• Trevena takes in $24M for drugs targeting G-proteins (release)
• “Specialty biotech” PanGenetics gets €23M for antibody drugs (release)
• Cancer-drug maker Unibioscreen pulls in €5M (release)
• Danish contract manufacturer CMC Biologics raises new funding (PDF release)
• EDF Ventures postpones fourth healthcare fund (peHUB)
• Liquidia Tech names Neal Fowler as CEO (release)

(NOTE: Sorry for the minimal posting yesterday — I was at the Health 2.0 conference with extremely limited Internet connectivity. Normal posting resumes today.)

Precision Thera merger with “blank check” Oracle Healthcare collapses – Another one bites the dust.

The saga of Precision Therapeutics, a Pittsburgh biotech developing what struck me last August as a particularly crude type of cancer-chemotherapy diagnostic, continues apace. In a tersely worded press release, the special-purpose acquisition company Oracle Healthcare Acquisition said it has terminated its planned merger with Precision. The release blamed “currently prevailing market conditions” for the decision, which carries some fairly ominous consequences for both sides.

Oracle’s plight is fairly simple: The blank-check company will now dissolve itself and return the money it raised, minus expenses, to investors. For Precision, however, the outlook is much starker. The merger would not only have taken the company public, it would have left Precision with $120 million in cash, ample resources to bolster sales of its ChemoFx test and to develop new potential products.

Now, after getting jilted at the altar by Oracle and withdrawing its IPO, the startup is most likely almost out of cash. As of September 30, Precision had only $15.6 million in cash and cash equivalents and a working-capital deficit of $1.1 million against debts of $17 million — plus a burn rate of roughly $3 million a quarter. Those numbers don’t look good by any measure

The first real sign the merger was in trouble came just about two weeks ago, when Oracle and Precision effectively cut the overall size of the deal by 15 percent — never a good sign. Oracle’s decision to walk away remains murky to me given the complexity of the deal, and external market events might have somehow triggered provisions that made the acquisition untenable. But I can’t help wondering if the buyers may have simply concluded that Precision’s prospects weren’t at all what they once thought.

Sleep Solutions takes in $21M for sleep-apnea diagnostics – Sleep Solutions, a Pasadena, Md., developer of diagnostic devices for sleep apnea, raised $20.5 million in a new funding round. Investors included TPG Biotechnology, MedVenture Associates, Emergent Ventures and Lava Ventures.

Sleep Solutions has developed a home-use diagnostic device for identifying sleep apnea, which are breathing difficulties during sleep. Diagnosing apnea has traditionally required patients to spend the night in a sleep laboratory. Left untreated, apnea can increase the risk of more serious problems, including stroke and heart attack.

Trevena takes in $24M for drugs targeting G-proteins – Trevena (no Web site), a Berwyn, Penn., biotech focused on a new area of drug discovery, raised $24 million in a first funding round. Investors included Alta Partners, Healthcare Ventures, New Enterprise Associates and Polaris Venture Partners.

Like many biotechs, Trevena plans to develop drugs that attack a particular biological mechanism rather than any particular disease. In this case, the company is targeting a class of proteins known as G-protein coupled receptors, or GPCR, which according to the company are affected by close to 40 percent of all drugs on the market today. The company didn’t describe its plans in any detail.

TODAY’S HEADLINES:

• Moberg Derma gets $4.5M for skin-disease treatments (PDF release)
• Chesson Labs takes in $3.3M for liquid skin bandage (bizjournals.com)
• TVM Capital takes stake in German pharma Riemser Arzneimittel (release)
• Cardinal Health acquires skin-disinfectant maker Enturia for $490M (release)

Can social networking help restrain, or even lower, healthcare costs? The Nashville, Tenn., startup change:healthcare is primed to find out.

Healthcare plans are inexorably forcing more cost-sharing on patients — a strategy some call YOYO, for “you’re on your own” — which means that the actual cost of medical care is looming larger for many Americans. Healthcare free-marketers think that’s a good thing, arguing that cost-consciousness will make people better medical consumers and cut down on the overuse of costly services. Their counterparts, meanwhile, worry that fewer people will be able to afford decent care and that individuals motivated to scrimp on medical care will tend to forego preventive check-ups that could catch serious conditions early, thus actually driving up costs over the long run.

Either way, we’re all likely to have to start paying more attention to what our medical care costs, not least because higher deductibles, coinsurance and co-payments are probably going to saddle us with a larger share of the bill. Yet medical pricing is murky to the point of almost complete opacity, since it’s difficult and at times almost impossible to find out what doctors or hospitals actually charge for an appointment or a procedure. Even then, costs can vary widely depending on how old a patient is, where she lives, whether she’s insured or not, and even what hospital or pharmacy she happens to step into.

It’s this informational void that change:healthcare hopes to address with a freshly revamped site that’s just gone live. The new service wraps together the startup’s previous two Health 2.0 services –MedBillManager, a subscription service for helping people manage complex medical bills, and FindYourDoc.com, a physician directory that change:healthcare took down several months back in anticipation of the redesign — and bolsters its social-network aspects, particularly the ability of users to share medical-cost information and rate their doctors or hospitals. The ultimate idea is to build up a database — one supplemented by data from employer healthcare billings, Medicare and other sources — that can help anyone shop around for high quality but inexpensive medical care.

We’ve covered change:healthcare in the past — see here and here, for instance — but I held off reviewing its offerings in light of the pending redesign. That was probably just as well, since FindYourDoc in particular had a slapdash feel to it, thanks to some odd display quirks and some gaps in hospital data that probably weren’t the site’s fault (it relied heavily on Medicare data at the time) but which were disconcerting nonetheless.

More after the jump:
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TODAY’S HEADLINES:

• InfraReDx takes $17M for arterial-plaque detection (VentureWire)
• Life-sciences fund Longitude Capital raises $95M (VentureWire)

InfraReDx takes $17M for arterial-plaque detection – InfraReDx, a Burlington, Mass., developer of diagonstic systems that detect arterial plaque, raised $17 million in a third funding round, VentureWire reports. Sanderling Ventures led the round, joined by new and previous individual investors.

InfraReDx previously planned to raise up to $40 million in order to support expected commercialization of its near-infrared device, which can identify buildups of arterial plaque that can rupture and lead to heart attacks (see our coverage). The test, however, requires a minimally invasive procedure in which the device is threaded into a patient’s circulatory system, making the InfraReDx device primarily useful for preventing second heart attacks in patients who are being treated for their first.

The company submitted its device for FDA approval in October, and is planning on a limited rollout if the device is cleared this quarter, as InfraReDx expects.

Life-sciences fund Longitude Capital raises $95M – Menlo Park, Calif.-based Longitude Partners, a spinout of Pequot Ventures, raised $95 million of an anticipated $325 million first fund, VentureWire reports. The fund will invest in biotech, medical-device and drug-development startups.

Last week, the Irvine, Calif., startup PrimeGen Biotech made a startling claim: It had successfully transformed adult skin, kidney and retina cells into stem cells, without using viral gene therapy that could trigger cancer. That would represent a significant advance over the discovery last year (see our coverage) that inserting just four genes into ordinary cells could reawaken their ability to transform themselves into any type of tissue, potentially opening the door to regenerative medicine that doesn’t rely on stem cells derived from five-day-old embryos.

But there’s no shortage of reasons to treat PrimeGen’s claims with skepticism, starting with the fact that it chose to announce them at last week’s Stem Cell Summit, an investment conference in New York whose Web site already seems to be defunct. Add in the facts that PrimeGen has been making similar claims for more than two years but hasn’t ever published its findings in a scientific journal, that it only seems to present actual data at obscure overseas meetings — on organized by the Pontifical Academy for Life and the World Federation of Catholic Medical Associations, for instance, and another arranged by Serono Symposia International, a producer of continuing medical educational events — and that it appeared inordinately tickled when a pro-life U.S. Senator praised its work as “the greatest thing on the horizon” in a 2006 congressional hearing, and you have an awfully good basis for suspicion.

PrimeGen also stands out as a very odd duck in the world of stem-cell startups. The company has largely been bankrolled by two tech-industry entrepreneurs, Kingston Technology co-founder John Tu and AST Research co-founder Thomas C.K. Yuen, neither of whom have any background in biology or medicine so far as I can tell — or even a history of supporting such work. Yuen, in fact, serves as PrimeGen’s chairman and CEO, another discordant note. The company’s Web site is an amateurish mess rife with scientific vaguery of the highest order, meaningless puffery — did you know that PrimeGen is “the global leader” in stem-cell research and regenerative medicine? Me neither — and executive bios that tout routine biomedical accomplishments such as “being a Principle[sic] Investigator of NIH grants” as if they were the Nobel Prize.

That’s all shaky enough, but none of it gave much pause to mainstream publications such as the U.K magazine New Scientist and the Philadelphia Inquirer, which played up the company’s unsubstantiated claims in recent articles (see here and here). Only the Inquirer offers a few reasons to question PrimeGen’s alleged achievement — in particular, pointing out that research now suggests it takes about two weeks to turn normal cells into what are technically callled “induced pluripotent stem cells,” whereas PrimeGen claims to do it in five to seven days.

The New Scientist piece, which goes into the most detail about PrimeGen’s technique, says the company used stretches of DNA that “code” for the same four genes used in one of last November’s gene-therapy experiments plus a fifth gene called Nanog. The company’s scientists supposedly attached the DNA to carbon nanoparticles that it mixed with the adult cells to reprogram them into iPS cells. Using the proteins coded by the genes allegedly had the same effect.

All this is certainly plausible — but so were other stem-cell “breakthroughs” that never panned out, most notably fabricated research touted by in 2005 by South Korean researcher Hwang Woo Suk, who claimed to have produced embryonic stem cells from adult tissue via cloning. Of course, it’s impossible to rule out the possibility that PrimeGen can indeed do exactly what it says here, but the signs aren’t auspicious. PrimeGen says it has submitted its latest results to a stem-cell meeting in Philadelphia this summer, and its science had better match or exceed its hype if it wants to be seen as anything but a colossal vanity project.

A few weeks ago, we broke the news that 5AM Ventures is nurturing a stealthy startup called — for now — ImmunoNewco. The trail led back to the Danish biotech Borean Pharma, which is developing protein-based drugs against autoimmune conditions, and which may be in the process of transferring some or all of its programs to ImmunoNewco.

5AM partners stopped responding to calls and email when I asked them about Borean — information that emerged thanks to the incautious LinkedIn profile, since edited, of a former Borean employee — and that naturally just sparked my curiosity. Now, with the assistance of a very useful database at the California Department of Corporations, I’ve managed to dig up some additional details.

According to this ImmunoNewco filing (PDF link) with the department, it appears that the startup is headed by Phyllis Whiteley, formerly VP of business development and licensing at Perlegen Sciences and now an entrepreneur-in-residence at 5AM. Perlegen, which spun out of gene-chip maker Affymetrix, has long been focused on personalizing medical treatments to an individual’s genetic profile. In particular, Perlegen wants to salvage failed or otherwise unsuccessful drugs by using genetic scans to determine which patients are most likely to benefit or avoid side effects — a concept known formally as “pharmacogenomics.”

Whiteley, who’s named as president of ImmunoNewco in the company’s California filings, appears to have worked at Perlegen for about three years — she was hired in late 2004 and apparently left sometime last year (her signature is on an ImmunoNewco filing from last October, although her replacements at Perlegen weren’t named until two weeks ago). She has a long history of negotiating drug-licensing deals and gave an interesting interview on Perlegen’s strategy to Pharmacogenomics Reporter in 2005.

It’s entirely possible that Whiteley is involved strictly because of her business skill at acquiring drug cast-offs from other companies. But if all these pieces really fit together — and I have to stress that this is only speculation at this point — it’s beginning to look as though one or more of Borean’s drugs didn’t work out, but that the folks behind ImmunoNewco think they can be salvaged via pharmacogenomics. I tried to reach Whiteley, but she’s not listed in 5AM’s voicemail directory and their operator seems to have taken the afternoon off.

What does all this amount to? At this point, frankly, not a whole lot beyond a stealthy company that’s fun to puzzle over. I happen to agree with Seth Levine’s partners that stealth is overrated as a business strategy, although of course VC firms like 5AM are well within their rights to keep whatever secrets they want to keep. But we’re also within our rights as journalists to pull on threads and see where they lead. Puzzles are fun, dammit.

The Health 2.0 movement, as I’ve noted before, makes some big claims about the Internet’s power to transform the relationships between patients and doctors, hospitals, insurers and each other. Some of that is undoubtedly true, and there’s a fascinating amount of innovation going on in this area– helped along by a recent torrent of venture capital.

There’s a downside to the movement, though, and that’s a bizarre oversupply of sites that are all doing slight variations on the same thing. Were you able to pick a Health 2.0 site at random, chances are good you’d hit one of dozens of online physican directories, health-specific search sites or health “portals” with some sort of attached social community. (Or even a site doing some combination of all of these, such as the health-search-and-community site iMedix, which we reviewed here.)

Probably nowhere is the glut so severe as among sites that aim to help patients find — and sometimes compare — doctors. Consider, for instance, the case of CareSeek, a Solvang, Calif., startup that last year launched a doctor-rating service called, reasonably enough, NursesRateDoctors.com. The idea was straightforward: Let nurses, who are in an unmatched position to observe doctors and their treatment of patients, could dish anonymously about physicians worth seeing — and those to avoid.

But lots of other entrepreneurs had similar ideas for doctor directories and rating services. “When we started, our competitive analysis showed there were maybe six sites doing this,” says CareSeek founder Gale Wilson-Steele. “We recently counted 31. The doctor review and rating space is very big and very noisy. But it creates a problem — no one is going to go to all these sites and rate the same doctor 31 times.”

CareSeek sought its advantage by appealing specifically to nurses, who frequently chafe at the perceived lower status of their profession relative to doctors. The company built its own director of doctors (for some of the general difficulties that presents, see my dCard post) and then went all-out to attract the attention of nursesd. “We did everything,” Wilson-Steele says. The company ran banner ads, attended trade shows and handed out gift certificates and chocolate bars bearing the message, “Help raise the bar in healthcare” and the site’s address. CareSeek even set up a laptop in a medical-uniform shop and offered a discount to nurses who agreed to rate a doctor on the spot. (More recently, it also established a partnership with an online nurses-uniform site.)

The idea is a variation on the old strategy of specializing in order to stand up to larger competitors (which in this case includes WebMD, RevolutionHealth, and — soon enough — Google Health). “We just have this specialized information,” Wilson-Steele says. “At some level, hundreds of patient reviews aren’t better than two or three good ones.”

Of course, course corrections were inevitable. In November, the company renamed the site NursesRecommendDoctors.com, in order to “better reflect its goal of providing consumers with nurses’ recommendations on excellent physicians that provide quality care,” as its release states. Many, though not all, nurses disliked the implication that the site was soliciting negative reviews, and preferred to single out physicians they admire — often their own family doctors and specialists, Wilson-Steele says.

More to the point, as many non-nurses were soon joining the site as nurses, who now appear to make up about half of the user base, although CareSeek doesn’t try to verify whether a user is, in fact, a nurse. Patients have also signed up to raterecommend doctors, and some doctors have also taken the opportunity to weigh in after the site notifies them that they’ve received a review — something it does routinely, usually by phone.

Largely as a result, in fact, the company now plans to deemphasize NursesRecommendDoctors in favor of the CareSeek brand, which Wilson-Steele wants to position as a place where health professionals write about healthcare providers. (The NursesRecommendDoctors address will, however, remain live and retain its own logo, although the community itself seems likely to be merged into the broader CareSeek membership.) Over time, CareSeek hopes to establish more of a social community among its members that it can survey. “There’s going to be a lot of very valuable data here about patient satisfaction,” Wilson-Steele says. “You can imagine guiding physicians into some of the highlights and showing them how to run their practice well.”

Despite CareSeek’s efforts, the nurse-focused site remains fairly small, with fewer than 1,000 registered users, and exactly how to turn the ratings/community site into a profitable business isn’t yet clear. Ad revenue is obviously one option, although it seems unlikely that there’s enough advertising to support CareSeek and all its competitors. So is finding some way to draw in partners who might be able to tap the collective wisdom of the site’s community, much the way Sermo does with its gated discussion forum for doctors (see our coverage here).

So far, CareSeek has the resources to experiment with. The company has raised $595,000 from angel investors, which is enough to build out the technology that supports the site and explore business alternatives, and plans on raising another $2 million to $5 million by mid-year. “The first dollars help you focus, the next dollars help you improve,” says Wilson-Steele. “At the end of that, you’ve got a vision for conquering the world.”

TODAY’S HEADLINES:

• Arriva Pharma recaps with $6M for respiratory anti-inflammatory drugs (release)
• Joint resurfacer Arthrosurface takes in $4M (release)

I’ve been generally unsympathetic to cries that biotech and medical-device companies will suffer if U.S. patent law is reformed, and that has a lot to do with some of the grotesque patent abuses biopharma companies have perpetrated — quite legally — over the years in order to lock out competition for as long as possible. While Big Pharma has probably been the biggest offender along these lines, Big Biotech has plenty to answer for as well.

Which is why the news that Genentech’s “Cabilly” patent, which lays claim to some fundamental techniques for making bioengineered antibodies, has just been rejected for a fourth time — although it’s still not dead — strikes me as a perfect occasion for Schadenfreude. For Cabilly, which continues to bring Genentech more than $100 million in royalties every year well after it should have expired, offers a terrific illustration of the the lengths companies will go to artificially extend patent terms. These zombie patents cost the healthcare system — which, of course, ultimately pays the price for shenanigans like these — billions of dollars, all the while stifling innovation and enriching those who have figured out how best to game the system.

The history of Cabilly is long and convoluted — anyone interested should take a look at this Legal Times piece (PDF link), tellingly titled “It Lives for 29 Years?” — so I’ll limit myself to the high points. In 1989, Genentech found its newly issued Cabilly patent in conflict with another, issued the very same day, owned by Celltech, a U.K. biotech that also claimed ownership of basic antibody technology. The companies clashed for years, first in the U.S. Patent and Trademark Office, then in the courts, before finally agreeing to settle the case.

Their 2001 agreement remains confidential, but the aftermath was clear. The court ruled in Genentech’s favor, voided the Celltech patent and, remarkably, issued Genentech a brand-new patent — “Cabilly II” — that covered exactly the same invention as Cabilly I. Genentech also agreed to pay Celltech the same royalties it would have received from its now-worthless patent until the date it would have expired in 2006. In other words, Celltech got paid as if it had won the case, while valuable antibody technology that would have entered the public domain two years ago remains locked up by Genentech’s new patent for another decade — until 2018, in fact.

The Cabilly patent, which earned Genentech $133 million last year, has come under sharp attack over the past several years. In 2005, MedImmune — now a unit of AstraZeneca — sued to invalidate Cabilly II on the grounds that it resulted from an illegal, anti-competitive agreement between Genentech and Celltech. That MedImmune case won’t actually be tried until June, as it was tied up for years in a procedural argument that went all the way to the Supreme Court. In the meantime, however, the patent office has also reexamined the patent and found it wanting on several occasions — most recently just two days ago.

Like the zombie it is, however, Cabilly keeps springing back to life every time someone thinks they’ve finally put it down. Genentech has the right to appeal the latest decision within the patent office and in the courts, has every incentive to run out the clock as long as it can. Unless, that is, the MedImmune case gets Cabilly first.

(Photo by Flickr user Bob.Fornal, used under Creative Commons license.)