Economist Proposes a $30 Billion Megafund for New Cancer Drugs

A hedge fund manager aims to solve the funding problems facing early-stage biomedical research.

By Jessica Leber on November 19, 2012

Hedge fund manager and prominent economist Andrew Lo is recognized for developing theories about how markets function and why they failed during the financial crisis. Now Lo, who is also the director of the MIT Sloan School of Management’s Laboratory for Financial Engineering, thinks he can also help create a better market for investing in promising treatments for cancer.

His proposal is to structure a new kind of financial tool, a “megafund,” for funneling up to $30 billion into the discovery of cancer drugs. The project would be unprecedented in scale at a time when the biomedical sector is searching for fresh funding ideas. As Lo says, the community is “ripe for something new.”

In a paper published in Nature Biotechnology earlier this fall, Lo and his coauthors note that large pharmaceutical companies are no longer nurturing early-stage drug development. Venture capitalists, too, are deserting life science startups, which averaged them negative 1 percent returns over the last decade. The result is a growing funding gap between basic lab research and commercial drug development. And fewer drugs are surviving the costly gauntlet of clinical trials to eventually reach FDA approval.

Lo’s proposal would expand the pool of capital available for life science investment by bringing together investors who would not normally fund research at top biomedical universities in exchange for a small percentage of all royalties from successful drugs or licensing revenues that result.

About five drug royalty investment companies already exist, Lo says, but they only invest in drugs that are already approved. His plan would do this at an earlier and riskier stage, and spread the risk using techniques found elsewhere in finance—and familiar from the mortgage crisis—securitizing future revenues, in this case from drug compound licenses, into debts called “research-backed obligations.”

Boosting funding this way could have a big payoff, Lo says. The sheer size of the megafund would reduce risk by diversifying investments across many more projects, and therefore could provide investors stronger guarantees of returns than any smaller fund. Just one blockbuster drug, the paper notes, can net $2 billion in income a year over a decade.

Lo’s computer models, based on historical data, indicate a $5 to $15 billion megafund would yield 9 to 12 percent returns for equity investors, and 5 to 8 percent returns for “research-backed obligation” holders—rates that could be attractive to pension funds, for example. Careful and realistic planning could avoid the “pitfalls” that sank the mortgage companies during the financial crisis, the Nature paper says.

So far, all of this is just words on paper and code in a software model (which Lo has released for others to tinker with).

Melissa Stevens, deputy executive director of Faster Cures, a nonprofit think tank, sees promise in the idea, but says there would also be lots of details to get right—cataloging the assets that exist, and deciding how to choose them, and assessing the levels of risk and time until reward. Hammering out workable agreements between researchers and investors would be a challenge, but not “insurmountable,” she says.

Nor will the concept solve all of the problems involved with life science investing. More money won’t fix, for example, the scientific and regulatory slowdowns that contribute to decreased productivity of each research dollar. “The question is not only how we can attract more capital into R&D, but how we can decrease the amount of capital that we need,” Stevens says. (Lo imagines a megafund could actually help this too, providing shared resources like basic legal support or lab resources among portfolio projects.)

The megafund idea is a relatively radical example of a growing number of new drug research funding models being tried in the face of the industry’s recent challenges.

Meanwhile, to attract more funding, “hybrid” funds are emerging that bring in nontraditional venture capital investors, like governments and philanthropies, willing to absorb more risk or wait longer for a reward, says Stevens.

Lo is organizing a conference for next year to bring together investors, researchers, executives, and the National Cancer Institute to hammer out more details. He thinks it should all be an easier sell in the post-financial crisis, post-bailout world: “We spent billions on General Motors, which sells cars people don’t want to buy. So $30 billion for cancer research should not be a big deal. These numbers don’t look that big to me now.”

Lawmakers say they’re confident they can avoid “fiscal cliff”

By Andy Sullivan

WASHINGTON | Sun Nov 18, 2012 12:39pm EST

(Reuters) – Leading U.S. lawmakers expressed confidence on Sunday that they could reach a deal to avert the “fiscal cliff” even as they laid down markers on taxes and spending that may make any agreement more difficult.

Republicans and Democratic leaders have agreed on a framework to reform the tax code and government benefit programs next year, but first need to prevent across-the-board tax increases and spending cuts due to begin in January that could push the economy back into recession.

That toxic $600 billion combination, known as the fiscal cliff, is the legacy of earlier failed budget deals. Both sides say they see greater willingness to compromise this time.

“What I hear is a perceptible change in rhetoric from the other side,” Dick Durbin, the No. 2 Senate Democrat, said on CNN’s “State of the Union” program. “And what it is is an invitation for our side to basically sit down and say, ‘What can we do for this country?'”

Taxes are the biggest hurdle.

President Barack Obama campaigned on a promise to raise tax rates on the wealthiest 2 percent of households, who have benefited more than the rest of the population over the past several decades as globalization and technology have transformed the U.S. economy. He wants to extend low tax rates for the bottom 98 percent of the population, but said he will not sign a budget deal that keeps low rates for the wealthiest in place.

Nancy Pelosi, the top Democrat in the House of Representatives, echoed this view. Though Republicans control the House, they will probably need Democratic votes to get any deal passed.

“If it’s going to bring in revenue, the president has been very clear that the higher-income people have to pay their fair share,” she said on ABC’s “This Week.”

A top Republican, Representative Tom Price, said his colleagues recognize the need to generate more tax revenue even as he said any tax-rate increase on the wealthy would lead to job losses.

Most Republican lawmakers have signed a pledge promising they will not tax rates. Instead, they want to generate more revenue through a rewrite of the code that would eliminate exemptions, lower rates and presumably spur the economy.

They also say tax changes must be paired with spending cuts.

“The two sides have identified the tax revenue that we’re willing to discuss, and now it’s time to talk about spending reductions,” Price, a member of the leadership team who has close ties to rank-and-file conservatives, said on CNN.

Many of Price’s fellow Republicans voted against an August 2011 budget deal that included $1 trillion in spending cuts on the grounds that it did not go far enough. That deal narrowly averted a U.S. default, but it rattled consumers and investors and led to a first-ever downgrade of the country’s debt.

Opinion polls show that Republicans would shoulder more of the blame if the country goes over the fiscal cliff in January. Price said his side is eager to avert disaster this time.

“Every member of our caucus appreciates that this fiscal crisis, this challenge that we have, is ever closer,” he said.

Durbin said he sees an increased willingness on the part of Republicans to reach a deal compared with prior budget standoffs. “You have to be careful. If you talk about taxes they run for the hills, but if you talk about revenue and tax reform they’ll sit still for that conversation,” Durbin said.

(Editing by Will Dunham)

Celgene’s pomalidomide improves survival in multiple myeloma

By Toni Clarke

Mon Nov 19, 2012 1:30pm EST

(Reuters) – Celgene Corp’s experimental cancer drug pomalidomide significantly improved survival in patients with multiple myeloma who had failed other therapies, according to a summary of data to be presented at a medical meeting next month.

The trial tested pomalidomide plus a low dose of dexamethasone, a standard treatment, and compared it with a high dose of dexamethasone alone.

Data showed patients who had failed an average of five previous therapies who took pomalidomide and low-dose dexamethasone survived significantly longer than those who took high-dose dexamethasone.

The company had previously reported that the drug improved survival, but the new data, the result of an interim analysis, show that no matter what occurs during the remainder of the trial, the improvement in overall survival will be highly significant.

The median overall survival for patients in the pomalidomide arm of the trial has not yet been reached, while the median overall survival in the control arm was 34 weeks.

From a statistical perspective, the results reflect “a very meaningful reduction in the risk of death for these refractory patients,” said Brian Abrahams, an analyst at Wells Fargo Securities.

Detailed results will be presented in December at the annual meeting of the American Society of Hematology.

The company had previously reported that the drug also improved progression-free survival, or the length of time patients lived before relapsing, but did not give the magnitude of improvement.

The new data shows pomalidomide nearly doubled that time to 15.7 weeks from 8 weeks in the control arm.

Celgene hopes the data will add weight to its application for marketingapproval of the drug. The company has already filed an application with U.S. and European health regulators based on data from a mid-stage trial that tested pomalidomide plus low-dose dexamethasone against pomalidomide alone.

Median progression-free survival in that trial, the main goal of the study, was 4.7 months in the pomalidomide plus low-dose dexamethasone arm compared with 2.7 months in the pomalidomide alone arm.

Multiple myeloma is a cancer that starts in plasma cells in bone marrow and ultimately disrupts the production of normal blood cells.

Geoff Meacham, an analyst at J.P. Morgan, estimates pomalidomide could generate sales of around $450 million by 2015. In July, Celgene’s chief executive, Robert Hugin, said he expects pomalidomide to eventually generate annual sales of more than $1 billion.

A decision from the U.S. Food and Drug Administration on whether to approve the drug is expected by February 10.

Celgene already sells the multiple myeloma drug Revlimid for patients at earlier stages of disease. Patients in the pomalidomide trial had failed to respond to Revlimid.

Celgene’s shares rose 0.8 percent to $74.94 in afternoon trading on Nasdaq. Earlier they rose as high as $76.10.

(Reporting By Toni Clarke)

Housing recovery gains traction

By Jason Lange

WASHINGTON | Mon Nov 19, 2012 1:26pm EST

(Reuters) – Home resales rose in October and a gauge of homebuilder sentiment climbed to a six-year high in November, signs of surprising vigor in the country’s still-struggling housing market.

The National Association of Realtors said on Monday that existing home sales climbed 2.1 percent last month to a seasonally adjusted annual rate of 4.79 million units, beating forecasts by Wall Street economists.

Separately, strengthening demand for new homes drove an increase in a monthly measure of home builder sentiment, which hit a more than six-year high in November, topping even the most optimistic forecast in a Reuters poll of analysts.

Rising home prices and a faster pace of sales have shown the housing market has finally turned the corner this year. The market collapsed when a mortgage debt bubble burst in 2006, helping trigger the 2007-09 recession.

The data on Monday suggested the recovery in housing is advancing even faster than many analysts had expected.

“The housing market is continuing to improve. It’s probably improving more than most economists were projecting earlier this year,” said Patrick Newport, an economist at IHS Global Insight in Lexington, Massachusetts.

The reports also support the view that the broader economic recovery is becoming increasingly self-sustaining, with job creation helping drive home sales, which in turn are supporting economic growth. Home building is expected to add to economic growth this year for the first time since 2005.

U.S. stock prices rose sharply, with investors heartened by the housing data and signs that lawmakers are making progress in talks aimed at avoiding sharp tax hikes and government spending cuts next year. Yields on U.S. government debt also rose.

The housing data also suggested that superstorm Sandy, a mammoth storm that slammed into the U.S. East Coast on October 29, continues to distort economic data in the United States.

The Northeast was the only region in the country where the pace of sales fell. NAR economist Lawrence Yun said Sandy would likely leave a bigger mark in November and December, although he expected the impact would only be temporary.

The storm, which killed more than 130 people in the United States and left millions of homes and businesses without electricity, led U.S. factories to cut production in October. It also weighed on auto sales as consumers stayed away from showrooms.

Economists, however, think Sandy’s impact on the economy will be temporary. Indeed, not all of the impact is negative. Home improvement retailer Lowes reported higher-than-expected profits on Monday as its sales got a lift from people buying items like generators, flashlights and batteries ahead of Sandy.

The housing data showed that home prices continue to rebound. In October, the median price for an existing home was $178,600, up 11.1 percent from a year earlier.

Supporting prices, fewer people sold their homes under distressed conditions, which include foreclosures, compared to the same period in 2011. Also, the nation’s inventory of existing homes for sale fell 1.4 percent during the month to 2.14 million, the lowest level since December 2002.

The shrinking supply of distressed and foreclosed inventory helped push U.S. homebuilder sentiment up for a seventh consecutive month in November.

The National Association of Home Builders said its sentiment index rose to 46 — the highest since May 2006 — from 41 the month before. Economists polled by Reuters had predicted the index would remain unchanged.

However, the gauge remained below 50, a reminder that the housing market was still some way off full recovery. Readings below 50 mean more builders view market conditions as poor than favorable. The index has not been above 50 since April 2006.

The measure has made strong progress over the last year, helping to cement optimism in the sector.

“Builders are reporting increasing demand for new homes as inventories of foreclosed and distressed properties begin to shrink in markets across the country,” said NAHB Chairman Barry Rutenberg.

(Additional reporting by Ed Krudy and Richard Leong in New York; Editing by Andrea Ricci and Tim Ahmann)

Shale Oil Will Boost U.S. Production, But It Won’t Bring Energy Independence

The U.S. will still need more big breakthroughs to eliminate the need for imported oil.

By Kevin Bullis on November 15, 2012

The United States could see a surge in oil production that could make it the world’s leading oil producer within a decade, according to a new report from the International Energy Agency. But that lead will likely be temporary, and it still won’t allow the United States to stop importing oil. Barring technological breakthroughs in oil production and major reductions in consumption, the United States will need to rely on oil from outside its borders for the foreseeable future.

This week’s IEA report predicts that a relatively new technology for extracting oil from shale rock could make the United States the world’s leading oil producer within a decade, beating the current leader, Saudi Arabia.

The idea that the U.S. could overtake Saudi Arabia, even temporarily, is a stunning development after years of seemingly inexorable declines in domestic oil production. U.S. production had fallen from 10 million barrels a day in the 1980s to 6.9 barrels per day in 2008, even as consumption increased from 15.7 million barrels per day in 1985 to 19.5 million barrels per day in 2008. The IEA estimates that production could reach 11.1 million barrels per day by 2020, almost entirely because of increases in the production of shale oil, which is extracted using the same horizontal drilling and fracking techniques that have flooded the U.S. with cheap natural gas.

As of the end of 2011, production had already increased to 8.1 million barrels per day, almost entirely because of shale oil. Production from two major shale resources in the U.S.—the Bakken formation in North Dakota and Montana and the Eagle Ford shale in Texas, now total about 900,000 barrels per day. In comparison, Saudi Arabia is expected to produce 10.6 million barrels per day in 2020.The shale oil resource, however, is limited. The IEA expects production to start gradually declining by the mid-2020s, at which time Saudi Arabia will reclaim the top spot.

Shale oil is creating a surge in U.S. oil production in part because it’s easy to find, says David Houseknecht, a scientist at the U.S. Geological Survey. The oil is spread over large areas, compared to the relatively small pockets of more conventional oil deposits in the United States. So whereas wildcatters drilling for conventional oil might come up empty two-thirds of the time or more, over 95 percent of shale oil wells strike oil.

Just how much shale oil can be produced—and how fast—depends heavily on two factors: the price of oil, and how easy it is to overcome possible local objections to oil fracking, says Richard Sears, a former executive at Royal Dutch Shell and a visiting scientist at MIT. Oil shale costs significantly more to produce than oil in Saudi Arabia and many other parts of the world, so for oil companies to go after this resource, oil prices need to stay relatively high. It’s hard to put a firm number on it, but Sears estimates that $50 to $60 a barrel would be enough, compared to the $85 per barrel price of oil now. Houseknecht puts the cost of production at closer to $70 a barrel. Although costs for producing conventional oil in the Middle East also vary, they typically don’t change more than $10 per barrel.

The IEA concludes that prices are likely to stay high enough to prompt companies to produce shale oil. Recent comments from OPEC support this idea. It recently declared that it’s happy with the current prices, indicating that it’s not likely to increase oil production to bring them down. What’s more, demand for oil in poor countries is likely to keep growing, putting pressure on oil prices to rise.

The other potential issue is whether opposition to fracking in local communities might put the brakes on shale oil development, Sears says. Concerns that fracking will contaminate drinking water have led to objections in some areas, as have concerns that shale oil requires far more drilling wells than conventional oil production. Even if the U.S. is able to quickly develop its shale oil resource, it isn’t likely to be enough to completely eliminate oil imports. The IEA expects that the U.S. will still import 3.4 million barrels per day in 2035. The U.S. consumes nearly 19 million barrels per day, leaving a gap of more than 7 million even at the expected peak in shale oil production in the mid-2020s. However, the IEA expects the gap will be reduced partly by increased use of biofuels and natural gas in transportation, as well as improved vehicle efficiency, which could lower demand for oil.

The IEA does conclude that the United States will nearly be energy self-sufficient by 2035, but that’s after offsetting oil imports with exports of coal and natural gas. To be truly energy independent, the United States would have to invest in technology for converting natural gas and coal into the liquid fuels needed for transportation, or have other technical breakthroughs, such as improved batteries or biofuels, that would quickly reduce the demand for oil.

U.S. stocks gain after White House talks, oil up on Mideast

By Herbert Lash

NEW YORK | Fri Nov 16, 2012 12:33pm EST

(Reuters) – U.S. stock markets turned higher at midsession on Friday after legislators suggested tentative progress had been made in talks at the White House on avoiding tax hikes and spending cuts that would hurt the economy in 2013.

U.S. stocks recovered from losses after Senate and House leaders from both parties said in comments that they held “constructive” talks.

But shares on major markets were still headed toward a second consecutive weekly loss as the collective worry about the U.S. government’s fiscal problems and weak global economic growth weighed on sentiment.

“This is the first time we’ve had one iota of anything constructive being done,” said Todd Schoenberger, managing principal at the BlackBay Group in New York.

“That’s very positive, but you can be flexible and still have us go over the cliff. Wall Street traders remain very nervous and need something concrete to get done,” he said.

President Barack Obama met with top U.S. lawmakers on Friday to discuss avoiding the so-called “fiscal cliff.” Investors have been concerned that if no deal were reached to modify automatic spending cuts and tax hikes, the U.S. economy could slip into recession. The S&P 500 has dropped 4.3 percent over the past two weeks, in part due to these worries.

Benchmark Brent crude oil prices rose toward $109 a barrel as a showdown between Israel and the Palestinians in Gaza stoked worries about supply. Investors were concerned that Arab producers may be drawn into any potential conflict, which could impact supply lines.

The Dow Jones industrial average .DJI was up 27.42 points, or 0.22 percent, at 12,569.80. The Standard & Poor’s 500 Index .SPX was up 3.19 points, or 0.24 percent, at 1,356.52. The Nasdaq Composite Index .IXIC was up 4.65 points, or 0.16 percent, at 2,841.58.

The MSCI world equity index .MIWD00000PUS was down 0.2 percent at 317.17, and has lost almost 2 percent this week.

FTSEurofirst 300 index .FTEU3 of top companies shed 1.0 percent to 1,067.45, on course for its worst week since late September.

The Japanese yen steadied a bit after a two-day pummeling against the U.S. dollar but remained on track for its worst weekly loss since late June on expectations of aggressive monetary easing from the Bank of Japan.

“The basic driver is still the interest rate differential between the dollar and yen, which is very narrow, and we have to wait for what happens after the (Japanese) elections,” said Marcus Hettinger, global FX strategist at Credit Suisse in Zurich.

The U.S. dollar was up 0.3 percent at 81.38 yen. The euro was down 0.5 percent against the dollar at $1.2704.

Brent crude rose 45 cents to $108.46 a barrel. U.S. oil gained 91 cents to $86.36.

U.S. Treasury debt prices rose slightly, with yields near two-month lows, on investor skepticism that budget talks aimed at preventing an automatic fiscal tightening will be immediately successful.

The benchmark 10-year U.S. Treasury note was up 3/32 in price to yield 1.58 percent.

(Additional reporting by Richard Hubbard in London; Reporting by Herbert Lash; Editing by Dan Grebler)

Military drones zero in on $400 billion civilian market

By Chris Wickham

LONDON | Wed Nov 14, 2012 2:29pm EST

(Reuters) – Military drone technology, which has revolutionized warfare over the last decade, will be ready for civilian use within four years and could create a market worth more than $400 billion.

That’s the prediction from a UK research project backed by the government and top aerospace companies hoping for a windfall as many of the dull, dirty and dangerous jobs done by manned aircraft are replaced by drones.

The consortium behind the program, which includes BAE Systems and Rolls-Royce, sees potential uses for drones from search and rescue to checking oil pipelines, jobs currently done with expensive aircraft flown by pilots who get tired and often in treacherous conditions.

Unmanned aircraft are already being used in niche areas. They were flown over the Fukushima nuclear power plant in Japan to check the damage and the British Antarctic Survey has put them to work checking ice and snow conditions.

“You’ll be able to do a lot of things you simply can’t do with manned aircraft,” said Lambert Dopping-Hepenstal, an engineering executive from BAE who is project director at the ASTRAEA program (Autonomous Systems Technology Related Airborne Evaluation & Assessment).

“We are in the hands of the regulators but within three to four years the technology will be at the right maturity levels,” he said.

Dopping-Hepenstal predicted that overcoming public concern about a sky full of autonomous aircraft will probably mean drones are first used in areas away from towns and cities, for sea rescue searches and monitoring fishing grounds.

Chris Elliott, an engineer and barrister who is a consultant to the ASTRAEA project, acknowledged there will be a lot of work needed to win public acceptance but added: “The Pandora’s Box is open”.

The use of drones in war zones has thrown up difficult ethical issues, particularly on accountability for mistakes, and the shift into civilian use is likely to be just as controversial.

“There is a public perception that has to be understood and correctly informed,” said Elliott, arguing that the industry needs to demonstrate safety and address the question of who is accountable should there be an accident.

The research program is working with the Civil Aviation Authority, which regulates UK air space, to demonstrate that the systems for controlling unmanned aircraft make them at least as safe as those with pilots.

Drones would always be controlled from the ground, as they are in military use, but complex systems for detecting terrain and other objects, from aircraft to skydivers, will mean they can fly themselves if communication links with the ground go down.

“This is in some respects the scary bit” as far as public perception is concerned, said Dopping-Hepenstal.

ASTRAEA estimates that broader use could be worth as much as $62 billion a year to the global aerospace industry by 2020.

Ruth Mallors, director of the UK aerospace Knowledge Transfer Network, said a report this year on the value of all the potential services drones could provide bumps that figure up to over $400 billion a year.

Legislators on both sides of the Atlantic are preparing the ground.

The U.S. Congress passed a bill in February requiring the Federal Aviation Administration to integrate unmanned aircraft systems into regulation by 2015. The European Commission wants to do the same by 2018.

ASTRAEA plans flight tests over the North Sea later this year using a Gulfstream aircraft. It will be set up to fly itself but the test plane will also carry a pilot, for now.

(Editing by Mike Nesbit)

Scientists use genome sequencing to halt superbug outbreak

By Kate Kelland

LONDON | Tue Nov 13, 2012 7:16pm EST

(Reuters) – Researchers have used DNA sequencing for the first time to identify, analyze and put a halt to an infectious disease outbreak in a hospital.

The success of the technique, which used fast genome sequencing technology to control an outbreak of the MRSA superbug on a baby ward, suggests it could be used to control hospital bugs, salmonella and E.coli infections and diseases like tuberculosis, scientists said.

“What we have glimpsed through this pioneering study is a future in which new sequencing methods will help us to identify, manage and stop hospital outbreaks,” said Nick Brown, an infection control doctor at Addenbrooke’s Hospital Cambridge, who co-led the study and presented the findings at a briefing.

MRSA, or methicillin-resistant staphylococcus aureus, is a drug-resistant bacterial infection, or superbug, and a serious public health problem. When outbreaks occur in hospitals it can lead to the closure of whole wards with many people infected.

The bug kills an estimated 19,000 people in the United States per year. Although rates of MRSA infection have come down significantly in Britain in recent years, it still presents a major threat with several hundred deaths a year and high hospital costs involved in managing infected patients.

Julian Parkhill from Britain’s Sanger Institute, who also worked on the study, said there is a “real health and cost burden from hospital outbreaks” which could be significantly reduced or eliminated if they were contained swiftly.

In the study, staff at Addenbrooke’s hospital using routine screening over a six month period found 12 patients carrying MRSA. Because they were only using standard tests, which provide limited information, the infection control team was not able to tell if the 12 were part of an outbreak, or were unconnected cases that did not present a threat.

MRSA is a bug present in around one percent of the population at any time, and does not always cause infection.

Parkhill and Brown’s team analyzed MRSA samples from the 12 patients with DNA sequencing technology and found that all the MRSA bacteria were closely related, confirming an outbreak.

By tracing relatives and other people who had recent links to the hospital, they also found the outbreak was more extensive than previously thought, with twice as many people carrying or infected with the MRSA strain.

While this sequencing study was underway, the hospital’s infection control team found a MRSA case in the special care baby unit – 64 days after the last MRSA patient had left.

The team used advanced DNA sequencing to show in real time that this strain was also part of the same outbreak, raising the possibility that a staff member was unknowingly carrying and transmitting the MRSA strain.

After screening 154 staff they found one carrying MRSA and, using DNA sequencing, confirmed it was the strain linked to the outbreak. The worker was quickly treated to eradicate the bug, and any further spread was stopped.

The researchers, whose findings were published in the Lancet Infectious Diseases journal, say this kind of fast genome sequencing could eventually form the basis for regional or national infection surveillance program designed to nip infectious disease outbreaks in the bud.

“This technology holds great promise for the quick and accurate identification of bacterial transmissions in our hospitals and could lead to a paradigm shift in how we manage infection control and practice,” said Parkhill.

It could also be used for outbreaks of food-borne infections like salmonella or E.coli. Genome sequencing was used in an E.coli outbreak in Europe in 2011, but only in the latter stages to help identify the source.

(Reporting by Kate Kelland; Editing by Rosalind Russell)

U.S. to become biggest oil producer – IEA

By Mark Thompson @CNNMoney November 12, 2012: 9:48 AM ET

LONDON (CNNMoney) — The United States will overtake Saudi Arabia to become the world’s biggest oil producer before 2020, and will be energy independent 10 years later, according to a new forecast by the International Energy Agency.

The recent resurgence in oil and gas production, and efforts to make the transport sector more efficient, are radically reshaping the nation’s energy market, reported Paris-based IEA in its World Energy Outlook.

North America would become a net exporter of oil around 2030, the global organization said Monday.

“The United States, which currently imports around 20% of its total energy needs, becomes all but self sufficient in net terms — a dramatic reversal of the trend seen in most other energy importing countries,” the IEA stated.

The U.S. is experiencing an oil boom, in large part thanks to high world prices and new technologies, including hydraulic fracking, that have made the extraction of oil and gas from shale rock commercially viable.

From 2008 to 2011, U.S. crude oil production jumped 14%, according to the U.S. Energy Information Administration. Natural gas production is up by about 10% over the same period.

According to the IEA, U.S. natural gas prices will rise to $5.5 per million British thermal units (MBtu) in 2020, from around $3.5 per MBtu this year, driven by rising domestic demand rather than a forecast increase in exports to Asia and other markets.

“In our projections, 93% of the natural gas produced in the United States remains available to meet domestic demand,” it said. “Exports on the scale that we project would not play a large role in domestic price setting.”

North America’s new role in the world energy markets will accelerate a change in the direction of international oil trade toward Asia, and underscore the importance of securing supply routes from the Middle East to China and India.

The IEA said it expects global energy demand to increase by more than a third by 2035, with China, India and the Middle East accounting for 60% of the growth, and more than outweighing reduced demand in developed economies.

That will push world average oil import prices up to $125 per barrel (in 2011 dollars) by 2035, from around $100 per barrel at present, but they could be much higher if Iraq fails to deliver on its production potential.

Iraq is set to become the second largest oil exporter by the 2030s, as it expands output to take advantage of demand from fast growing Asian economies.

New fuel economy standards in the U.S. and efforts by China, Japan and the European Union to reduce demand would help to make up for a disappointing decade for global energy efficiency.

“But even with these and other new policies in place, a significant share of the potential to improve energy efficiency — four-fifths of the potential in the buildings sector and more than half in industry — still remains untapped,” the IEA stated.

Policymakers are still missing out on potential benefits for energy security, economic growth and the environment.

Growth in demand over the years to 2035 would be halved and oil demand would peak just before 2020, if governments took action to remove barriers preventing the implementation of energy efficiency measures that are already economically viable, the global organization said.

A Carbon Microthread That Makes Contact with the Mind

By Antonio Regalado on November 11, 2012

Connecting a human brain to a computer is as much a materials science problem as a biology one. What kind of interface is delicate enough not to damage nerve tissue, but resilient enough to last decades?

Researchers have come up with what they call a “stealthy neural interface” made from a single carbon fiber and coated with chemicals to make it resistant to proteins in the brain.

The new microthread electrode, designed to pick up signals from a single neuron as it fires, is only about 7 micrometers in diameter. That is the thinnest yet developed, and about 100 times as thin as the conventional metal electrodes widely used to study animal brains.

“We wanted to see if we could radically change implant technology,” saysTakashi Kozai, a researcher at the University of Pittsburgh and the first author on the paper, published today in the journal Nature Materials. “We want to see an electrode that lasts 70 years.”

Researchers need long-lasting electrodes in order to improve brain-machine interfaces. These systems, in preliminary studies, have allowed paralyzed people to control robotic limbs or a computer mouse. By using electrodes to record the firing of individual brain cells, scientists have learned to decode these signals as representing the movement of a rat’s whiskers or a quadriplegic’s effort to move his arms (see “Monkey Thinks Robot into Action”).

“This was a nice demonstration that these fibers could be insulated [and] coated with an effective recording surface,” says Andrew Schwartz, another brain-machine interface researcher at the University of Pittsburgh who was not involved with the work. He cautions, however, that it could be difficult to insert such fine, flexible electrodes into brain tissue, and to secure them. Schwartz notes that recordings broke down in many of the animals studied.

Schwartz says it’s widely believed small fibers are “a good thing, because they seem to be ‘ignored’ by the brain.” Conventional electrodes stop recording after a couple of years as scar tissue builds around them. To improve the electrode’s performance, the researchers also coated its tip with a polymer that helps it pick up an electrical signal.

In experiments being carried out with human volunteers, Schwartz has used a 15-year-old technology called the Utah array, a rigid array of around 100 metal electrodes that is about the size of the “Q” on a computer keyboard (see “New Brain Machine Interfaces”).

The latest work, done in the University of Michigan’s Neural Engineering lab, was led by Daryl Kipke, a researcher who is also CEO of a company, NeuroNexus, that sells neural recording equipment. Kipke said a patent application had been filed on the work.