Endocyte Doubles After Drug Shown to Slow Lung Cancer

By Anna Edney  Mar 21, 2014 8:11 AM PT

Endocyte Inc., a biotechnology company with no marketed products, more than doubled in value after its experimental medicine slowed the progression of lung cancer in a study.

The drug, vintafolide, also won the backing of a European Union panel to treat ovarian cancer along with an imaging agent that will help the therapy target the patients who will respond best, the West Lafayette, Indiana-based company said today in a statement. Endocyte surged 89 percent to $27.60 at 10:52 a.m. New York, after rising to as high as $33.70 in the largest intraday increase since the shares began trading in 2011.

The trial results in non-small cell lung cancer are key because that study involves a larger patient population,Adnan Butt, an analyst at RBC Capital Markets in San Francisco, said in an e-mail. The mid-stage study showed vintafolide combined with chemotherapy reduced the risk of patients’ lung cancer worsening or of death by 25 percent compared with chemotherapy alone.

“We’ve studied vintafolide in two of the toughest-to-treat cancers and seen positive results and we view this as a continuing validation of the drug and the platform,” Chief Executive Officer Ron Ellis said on a conference call today.

Attractive Candidate

The company could be a candidate for a merger or acquisition “with an attractive product, pipeline and technology,” said Butt, the analyst, who didn’t mention any potential suitors by name. The study confirms that Endocyte is “a platform technology company, along the same lines as” ImmunoGen Inc. and Seattle Genetics Inc. he said.

The start of a final-phase trial required for approval to sell the drug will depend on data still being gathered on how long vintafolide extends patients’ lives, Ellis said. That data may be available later this year, he said.

The timing will be up to partner Merck & Co., Endocyte said. Whitehouse Station, New Jersey-based Merck, which joined Endocyte in the development of vintafolide in 2012, fell less than 1 percent to $55.36.

To contact the reporter on this story: Anna Edney in Washington at aedney@bloomberg.net

To contact the editors responsible for this story: Reg Gale at rgale5@bloomberg.net Bruce Rule, Robert Valpuesta

Airbnb in funding talks valuing it at about $10 billion: source

Online home-rental marketplace Airbnb Inc is in advanced talks with private equity firms including TPG Capital Management LP TPG.UL to raise funds that would value the company at about $10 billion, a person briefed on the matter said Thursday.

TPG is likely to lead the funding round, which could exceed $400 million. Texas-based TPG recently made a large investment in ride-sharing company Uber, another major player in the burgeoning sector known as the sharing economy.

The Airbnb talks were first reported Thursday by The Wall Street Journal. (r.reuters.com/fup77v)

Airbnb, whose website rental listings range from private rooms to manors and islands, has become one of Silicon Valley’s most successful start-ups in the five years since it was founded by a trio of graduates from the Rhode Island School of Design and Harvard.

But its foray into the hospitality business has been met with controversy in critical marketslike New York state, which prohibits renters from subletting their homes for less than 30 days if they are not present. The company remains locked in a legal battle with New York Attorney General Eric Schneiderman, who subpoenaed Airbnb for information about its hosts in the state last year to determine which were in violation of state law.

The San Francisco city attorney’s office has also looked into the legality of such short-term rentals after coming under pressure from tenant advocates, who say the proliferation of Airbnb rentals has sapped the rental housing market of supply and driven up rent prices.

A valuation of $10 billion would make Airbnb worth more than Hyatt Hotels Corp (H.N), which has a market value of $8.43 billion, and Wyndham Worldwide Corp (WYN.N), valued at $9.39 billion.

(Reporting by Gerry Shih in San Francisco and Sweta Singh in Bangalore; Editing by Sriraj Kalluvila and Leslie Adler)

Alibaba invests $280 million in messaging app Tango

Tango, the mobile messaging app-maker, announced Wednesday it has raised $280 million in a new funding round led by Chinese e-commerce giant Alibaba Group Holding Ltd.

By almost any measure, the investment amounted to a staggering sum for a mobile app developer. The deal, which came one month after Facebook Inc’s stunning $19 billion acquisition of Whatsapp, underscored the lengths that Internet companies are willing to go to gain a foothold in mobile communications.

Alibaba invested $215 million while the remainder of the funding came from Tango’s prior investors, which include Access Industries, Draper Fisher Jurvetson and Jerry Yang, a co-founder of Yahoo Inc, Tango said.

The investment gives Alibaba a minority stake in a messaging service with 200 million registered users and 70 million active users. Tango claims significant traction in North America, the Middle East, Taiwan and Singapore.

Alibaba, which views Chinese rival Tencent as its most serious competitor, has long recognized the threat posed by Tencent Holding’s WeChat, a massively popular messaging app that has slowly morphed into an e-commerce platform. Alibaba recently introduced a WeChat competitor called Laiwang, but the service has so far struggled to the extent that Alibaba founder Jack Ma, according to various media reports, urged Alibaba’s entire workforce last year to recruit new users.

Tango, the mobile messaging app-maker, announced Wednesday it has raised $280 million in a new funding round led by Chinese e-commerce giant Alibaba Group Holding Ltd.

By almost any measure, the investment amounted to a staggering sum for a mobile app developer. The deal, which came one month after Facebook Inc’s stunning $19 billion acquisition of Whatsapp, underscored the lengths that Internet companies are willing to go to gain a foothold in mobile communications.

Alibaba invested $215 million while the remainder of the funding came from Tango’s prior investors, which include Access Industries, Draper Fisher Jurvetson and Jerry Yang, a co-founder of Yahoo Inc, Tango said.

The investment gives Alibaba a minority stake in a messaging service with 200 million registered users and 70 million active users. Tango claims significant traction in North America, the Middle East, Taiwan and Singapore.

Alibaba, which views Chinese rival Tencent as its most serious competitor, has long recognized the threat posed by Tencent Holding’s WeChat, a massively popular messaging app that has slowly morphed into an e-commerce platform. Alibaba recently introduced a WeChat competitor called Laiwang, but the service has so far struggled to the extent that Alibaba founder Jack Ma, according to various media reports, urged Alibaba’s entire workforce last year to recruit new users.

Tango is the latest in a string of investments for Alibaba, which is preparing for an highly anticipated initial public offering in New York that could value the company at $200 billion.

MESSAGING WARS

In an interview, Tango co-founder Eric Setton told Reuters that he believed his company, which offers games, multimedia sharing and other content, would eventually beat Whatsapp, which offers purely text and voice communications.

“The platform approach I believe is the winning strategy,” Setton said. “We’ve now seen it in a number of key markets, with Kakao in Korea or Line in Japan.”

Tango, which has offices in Mountain View, California, Beijing and Austin, Texas, was introduced to Alibaba through Yang, who in 2005 led Yahoo’s investment in the Chinese company.

Google takes consumers’ wrists to next frontier with Android watch

Voice-controlled smartwatches that track heart rates and connect to phones and tablets will debut later this year as Google Inc partners with electronics, technology and fashion companies to take consumers to the next promised frontier in computing.

Google on Tuesday unveiled plans to help develop the watches and other wearable computers based on its Android mobile operating system, which already runs more than three out of four smartphones sold worldwide.

The Android Wear project is open to software makers to create apps for the watches, putting Google at the forefront of efforts to jumpstart the nascent wearable computing market.

The news comes as speculation swirls around iPhone-maker Apple Inc’s plans for wearable computers, including a smartwatch of its own. Apple Chief Executive Tim Cook has promised new “product categories” later this year.

A video posted on Google’s blog on Tuesday showed people speaking into their watches to check sports scores, control music, send replies to text messages and even open their home garages.

By aligning itself with a broad spectrum of partners to develop the smartwatches, Google is hoping to replicate the success that helped make its free Android software the most popular smartphone operating system, analysts said.

LG Electronics said on Tuesday it would introduce its first Android watch, the G Watch, in the second quarter. Motorola said its Moto 360 Android watch would be available this summer. Fossil Group Inc, which makes watches, handbags and other accessories, also announced that it was working with Google on Android devices.

Many believe wearable computers represent the next big shift in technology, just as smartphones evolved from personal computers, but efforts by various companies so far have had mixed results.

Samsung was among the first to sell a smartwatch for consumers, but its maiden effort, the Galaxy Gear, was widely panned by reviewers.

Google’s announcement “definitely gives wearables a status that it’s a market in its own right and it needs to be treated with the respect that a separate operating system branch gives it,” said Carolina Milanesi, an analyst with Kantar World Panel.

FITNESS TRACKERS

Android smartwatches will connect wirelessly to a mobile phone and can be outfitted with a variety of sensors, Google said. That means that apps developed for Android watches will be able to monitor fitness and health information such as a wearer’s heart rate or distance jogged.

Google released an Android Wear Developer Preview on Tuesday, saying it would allow software makers to begin creating specialized apps for the watches.

Google has also been developing Google Glass, a small stamp-sized screen attached to a pair of eyeglass frames. Google Glass can record video, access email, provide turn-by-turn driving directions and retrieve info from the Web by connecting wirelessly to a user’s cell phone, but it has also raised concerns ranging from privacy intrusions to distracted driving.

Smartwatches have a better chance of catching on with the general public than Google Glass, said Ramon Llamas, an analyst with industry research firm IDC.

“It’s a really cool idea, but there’s something that creeps people out about it,” Llamas said of Google Glass.

The success of smartwatches will depend on the device’s price, battery life and the appeal of the watches’ designs, he said.

Motorola said it would share more details about its forthcoming Moto 360 smartwatch when it holds a special online press conference on Wednesday. Google recently announced plans to sell its Motorola business to Chinese PC-maker Lenovo Group Ltd.

Juniper Research expects more than 130 million smart wearable devices will ship by 2018. Moreover, global shipments of wearable “smart glasses” alone will reach 10 million each year by 2018, compared with an estimated 87,000 in 2013, according to the research firm.

MUST HAVE OR NICE TO HAVE?

Google, whose projects range from self-driving cars to robots, likely sees smartwatches as part of the future evolution of computing, said Raymond James analyst Aaron Kessler. But he said it remained to be seen whether smartwatches will become an indispensable digital accessory or a “nice-to-have” gadget.

“At this point I would still view it as a niche product,” he said.

Among the more than 10 companies that are partnering with Google on Android watches are Samsung Electronics Co, HTC Corp, Asustek Computer Inc, Intel Corp, Qualcomm Inc, Broadcom Corp and Mediatek Inc.

Qualcomm and its manufacturing customers are working on “multiple” wearable devices based on its Snapdragon processors, spokesman Jon Carvill said. He declined to elaborate.

“We’ve barely scratched the surface of what’s possible with mobile technology,” Google said in a post on its official blog on Tuesday. “That’s why we’re so excited about wearables — they understand the context of the world around you, and you can interact with them simply and efficiently, with just a glance or a spoken word.”

Shares of Google closed 1.6 percent higher at $1,211.22 on Tuesday. Shares of Fossil Group rose 4.6 percent to $118.04.

Alibaba plans IPO that could break Facebook’s record, Yahoo shares jump By Jeremy C. Owens

Alibaba plans to hold its initial public offering — which could be the largest ever for a technology company — in the United States, and Yahoo is already reaping rewards from its early investment in the Chinese powerhouse, with the Sunnyvale company’s stock shooting higher Monday morning.

Alibaba officially announced Sunday that it would file for an IPO in the United States instead of Hong Kong, though the e-commerce company news release said that a future filing in China for a dual listing is possible.

“This will make us a more global company and enhance the company’s transparency, as well as allow the company to continue to pursue our long-term vision and ideals,” the company’s statement read.

An employee walks past a logo of Alibaba Group at its new base on the outskirts of Hangzhou, China, on Nov. 4, 2013.

An employee walks past a logo of Alibaba Group at its new base on the outskirts of Hangzhou, China, on Nov. 4, 2013. (JEFF LEE/EPA)

Founded by Jack Ma in 1999, the Hangzhou, China, company is well-known internationally for its self-titled website, which links small and medium-sized businesses around the world with manufacturers in China and elsewhere. The approach helped Alibaba enjoy an annual growth rate of about 50 percent of registered users from the U.S. from 2008 to 2012, when it reached 6.2 million American users at the end of last year; total membership checked in at 36.7 million registered users from more than 240 countries and regions, with more than 2.8 million supplier online storefronts and more than 5,900 product categories.

The company has its hands in several other pies as well, including its Taobao Internet retail website, which launched in 2003 and is analogous in China to eBay or Amazon in the states. In fact, Alibaba Group claims a larger gross merchandise volume — a measure roughly equal to gross sales — than eBay or Amazon combined, and could eclipse Wal-Mart in sales within five years.

Yahoo invested $1 billion for a 40 percent stake in the company in 2005, when the Sunnyvale Internet company’s cofounder, Jerry Yang, was CEO. Yahoo has already realized large profits from the deal, with current CEO Marissa Mayer selling half of that stake back to Alibaba for $6.3 billion in cash and $800 million in preferred stock in the company, as well as a cash payment of $550 million for intellectual property and other considerations.

Yahoo came away from that deal with about $4 billion after taxes, the bulk of which was used to buy back stock, while still holding on to a stake of about 24 percent of Alibaba. Investor excitement has shown up in Yahoo’s stock price, which more than doubled in 2013 despite the company’s revenues showing few signs of growth. Alibaba’s revenues topped Yahoo’s for the first time in 2013, when the Chinese company’s sales flew 65 percent higher to finish higher than $6 billion, while Yahoo’s revenues declined 6.1 percent to $4.7 billion, according to Yahoo’s annual report.

Yahoo’s shares roared higher again after the IPO announcement, gaining 4 percent Monday to close at $39.11.

“There are certainly some smart investments that I owe to my predecessors. Very notably, Jerry Yang’s investment in Alibaba is something that people are very excited about,” Mayer said at a conference in San Francisco last year.

While Alibaba has not established how many shares it expects to sell nor a preliminary price range, experts say the company is currently worth as much as $200 billion, topping Amazon’s market capitalization, $172 billion. An IPO that comes anywhere near that type of valuation would easily top Facebook’s $104 billion value during its May 2012 IPO, when the Menlo Park social network raked in $16 billion, the most ever for a technology company.

Alibaba’s negotiations to list its company in Hong Kong fell apart because Alibaba refused to change its unique management structure to abide by that exchange’s rules, according to reports late last year. Hong Kong’s exchange does not allow dual-class stock structures that give early investors greater power than new stockholders, a tactic used by several Silicon Valley powerhouses including Google and Facebook; while Alibaba is not seeking a dual-share structure, its partnership model allows the partners to dictate who sits on the company’s board instead of shareholders, which Hong Kong would not allow.

Microbes and Metabolites Fuel an Ambitious Aging Project

Craig Venter’s new company wants to improve human longevity by creating the world’s largest, most comprehensive database of genetic and physiological information.  WHY IT MATTERS: A better understanding of human aging could help researchers treat many diseases.

Last week, genomics entrepreneur Craig Venter announced his latest venture: a company that will create what it calls the most comprehensive and complete data set on human health to tackle diseases of aging.

Human Longevity, based in San Diego, says it will sequence some 40,000 human genomes per year to start, using Illumina’s new high-throughput sequencing machines (see “Does Illumina Have the First $1,000 Genome?”). Eventually, it plans to work its way up to 100,000 genomes per year. The company will also sequence the genomes of the body’s multitudes of microbial inhabitants, called the microbiome, and analyze the thousands of metabolites that can be found in blood and other patient samples.

But despite decades of research on aging and age-related diseases, there are no treatments to slow aging, and diseases like cancer, heart disease, and Alzheimer’s continue to plague patients. A more comprehensive approach to studying human aging could help, says Guarente. The key is to go beyond genome sequencing by looking at gene activity and changes in the array of proteins and other molecules found in patient samples.

To that end, Human Longevity will collaborate withMetabolon, a company based in Durham, North Carolina, to profile the metabolites circulating in the bloodstreams of study participants. Metabolon was an early pioneer in the field of metabolomics, which catalogues the amino acids, fats, and other small molecules in a blood or other sample to develop more accurate diagnostic tests for diseases (see “10 Emerging Technologies 2005: Metabolomics”).

Metabolon uses mass spectrometry to identify small molecules in a sample. In a human blood sample, there are around 1,200 different types; Metabolon’s process can also determine the amount of each one present. While genome sequencing can provide information about inherited risk of disease and some hints of the likelihood that a person will have a long life, metabolic data provides information on how environment, diet, and other features of an individual’s life affect health.

Metabolic data can also help researchers interpret the results of genome-based studies, which can often pinpoint a particular gene as important in a disease or a normal cellular process without clarifying what that gene actually does. If a particular metabolite is found to correlate with a particular genetic signal in a study, then researchers have a clue as to the function of the DNA signal.

And changes in blood metabolites are not just caused by changes in human cell behavior: the microbes that live in our bodies produce metabolites that can be detected in blood, says John Ryals, CEO and founder of Metabolon. “When you get certain diseases, we believe your gut microbiome is changing its composition, and that leads to changes in what molecules are being made,” he says.

Ryals says his company, working with collaborators, has already shown that blood biochemistry changes with aging: “You can tell how old someone is just by looking at their metabolites.”

Human Longevity says it will license information from its databases to pharmaceutical and biotechnology companies as well as academics.

 

Microsoft shares flirt with dotcom-boom levels on iPad app report

(Reuters) – Microsoft Corp’s shares scaled levels last seen in the dotcom boom on Tuesday following reports that the company plans to unveil an iPad version of its Office software suite, potentially generating billions of dollars in revenue.

Reuters reported on Monday that new Microsoft Chief Executive Satya Nadella would unveil the iPad app at an event on March 27 as part of his “mobile first cloud first” strategy.

The event would be Nadella’s first major public appearance since his appointment last month.

Microsoft shares rose as much as 5 percent to $39.90, adding $15 billion to the company’s market value. At that price, the stock was up about 10 percent since the announcement of Nadella’s appointment on February 4. The shares last touched $40 in July 2000.

Microsoft has had iPad and iPhone versions of Office primed for several months now, sources told Reuters, but the company has dallied on their release due to internal divisions, among other things.

Analysts said the lack of an Office version for the iPad may have robbed Microsoft of billions of dollars in revenue. (Reuters Insider: reut.rs/1gC77rr)

“We estimate that if 10 percent of the iPad install base were to subscribe to Office then this could add 15 million subscribers and generate $1.1 billion to $1.5 billion in consumer Office subscription revenue per year,” Bernstein Research analyst Mark Moerdler said in a note on Tuesday.

Investors have for years urged Microsoft to adapt Office, its most profitable product, for iPhones and iPads and devices using Google Inc’s Android software rather than shackling it to Windows as PC sales decline.

Barclays analyst Raimo Lenschow said the plan to launch the iPad app would signal that Microsoft is moving towards a more serious cross-platform strategy.

Moerdler said he did not believe that the app would have any significant positive or negative impact on Microsoft’s Windows franchise as most corporate customers use Windows.

Microsoft already offers Office Online on its Windows smartphones and as a free Web-based version.

Google Inc has been making inroads into Microsoft’s Office software business with its free Google Drive application, which includes spreadsheets and word-processing tools.

Last year, Apple offered free upgrades for life on its iWork business software, which includes rival applications to Microsoft’s Excel, Word and PowerPoint, for Macbooks, Mac computers and iPad.

Microsoft shares were trading up 3.6 percent at $39.42 in midday trading on the Nasdaq.

(Reporting by Supantha Mukherjee and Soham Chatterjee in Bangalore; Editing by Saumyadeb Chakrabarty)

Audi Bets on Bio Gasoline Startup

Startup Global Bioenergies uses genetic engineering to avoid one of the costliest steps in biofuel production.

By Kevin Bullis

Audi is investing in a startup, Paris-based Global Bioenergies, that says it can make cheap gasoline from sugar and other renewable sources. The strategic partnership includes stock options and an unspecified amount of funding.

As with conventional biofuel production, Global Bioenergies technology uses microӧrganisms to ferment sugars to produce fuel. But its process eliminates the second most costly part of producing biofuels—the energy-intensive distillation step. And by making gasoline instead of making ethanol, the startup skirts a major problem hampering growth in biofuels—the fact that the market for ethanol is saturated.

Global Bioenergies has demonstrated its technology in the lab and is building two pilot facilities to produce isobutene, a hydrocarbon that a partner will convert into gasoline through an existing chemical process. The larger of the two pilot facilities will be big enough to support the production of over 100,000 liters of gasoline a year.

The process addresses one of the key challenges with conventional biofuels production—the fuel can kill the microӧrganisms that make it. In a conventional fermentation process, once the concentration of ethanol gets to about 12 percent, it starts to poison the yeast so that it can’t make any more ethanol.

Global Bioenergies has genetically engineered E. coli bacteria to produce a gas (isobutene) that bubbles out of solution, so its concentration in the fermentation tank never reaches toxic levels. As a result the bacteria can go on producing fuel longer than in the conventional process, increasing the output of a plant and reducing capital costs.

The isobutene still needs to be separated from other gases such as carbon dioxide, but Global Energies says this is much cheaper than distillation.

The new process doesn’t address the biggest cost of biofuels today—the cost of the raw materials. It’s designed to run on glucose, the type of sugar produced from corn or sugarcane. But the company is adapting it to work with sugars from non-food sources such as wood chips, which include glucose but also other sugars such as xylose.

 

Audi’s partnership with Global Bioenergies is part of push by the automaker to reduce greenhouse gas emissions in the face of tightening regulations. Audi recently announced two other investments in cleaner fuels. It funded a project to make methane using renewable energy—the methane can be used to run Audi’s natural-gas fueled cars (see “Audi to Make Fuel Using Solar Power”). And it funded Joule Unlimited, which is using photosynthetic microӧrganisms to make ethanol and diesel (see “Audi Backs a Biofuels Startup”).

Is Google Cornering the Market on Deep Learning?

A cutting-edge corner of science is being wooed by Silicon Valley, to the dismay of some academics.

By Antonio Regalado

How much are a dozen deep-learning researchers worth? Apparently, more than $400 million.

This week, Google reportedly paid that much to acquire DeepMind Technologies, a startup based in London that had one of the biggest concentrations of researchers anywhere working on deep learning, a relatively new field of artificial intelligence research that aims to achieve tasks like recognizing faces in video or words in human speech (see “Deep Learning”).

The acquisition, aimed at adding skilled experts rather than specific products, marks an acceleration in efforts by Google, Facebook, and other Internet firms to monopolize the biggest brains in artificial intelligence research.

In an interview last month, before the DeepMind acquisition, Peter Norvig, a director of research at Google, estimated that his company already employed “less than 50 percent but certainly more than 5 percent” of the world’s leading experts in machine learning, the wider discipline of which deep learning is the cutting edge.

Companies like Google expect deep learning to help them create new types of products that can understand and learn from the images, text, and video clogging the Web. And to a significant degree, leading academic scientists have embraced Silicon Valley, where they can command teams of engineers instead of students and have access to the largest, most interesting data sets. “It’s a combination of the computing resources we have and the headcounts we can offer,” Norvig said. “At Google, if you want a copy of the Web, well, we just happen to have one sitting around.”

Yoshua Bengio, an AI researcher at the University of Montreal, estimates that there are only about 50 experts worldwide in deep learning, many of whom are still graduate students. He estimated that DeepMind employed about a dozen of them on its staff of about 50. “I think this is the main reason that Google bought DeepMind. It has one of the largest concentrations of deep learning experts,” Bengio says.

Vying with Google for talent are companies including Amazon, Microsoft, and also Facebook, which in September created its own deep learning group (see “Facebook Launches Advanced AI Effort to Find Meaning in Your Posts”). It recruited perhaps the world’s best-known deep learning scientist, Yann LeCunof New York University, to run it. His NYU colleague, Rob Fergus, also accepted a job at the social network.

 

As advanced machine learning transitions from a primarily scientific pursuit to one with high industrial importance, Google’s bench is probably deepest. Names it has lured from academia into full-time or part-time roles include Sebastian Thrun (who has worked on the company’s autonomous car project); Fernando Pereira, a onetime University of Pennsylvania computer scientist; Stanford’s Andrew Ng; and Singularity University boss Ray Kurzweil.

Last year, Google also grabbed renowned University of Toronto deep-learning researcher Geoff Hinton and a passel of his students when it acquired Hinton’s company, DNNresearch. Hinton now works part-time at Google. “We said to Geoff, ‘We like your stuff. Would you like to run models that are 100 times bigger than anyone else’s?’ That was attractive to him,” Norvig said.

Not everyone is happy about the arrival of the proverbial Google Bus in one of academia’s rarefied precincts. In December, during a scientific meeting in Lake Tahoe, Mark Zuckerberg, the founder and CEO of Facebook, made a surprise appearance accompanied by uniformed guards, according to Alex Rubinsteyn, a bioinformatics researcher at Mount Sinai Medical Center, who complained in a blog post that a cultural “boundary between academia and Silicon Valley” had been crossed.

“In academia, status is research merit, it’s what you know,” Rubinsteyn says. “In Silicon Valley, it’s because you run a company or are rich. And then people around those people also think about getting rich.”

Peter Lee, head of Microsoft Research, told Bloomberg Businessweek that deep learning experts were in such demand that they command the same types of seven-figure salaries as some first-year NFL quarterbacks.

Some have resisted industry’s call. Of the three computer scientists considered among the originators of deep-learning—Hinton, LeCun, and Bengio—only Bengio has so far stayed put in the ivory tower. “I just didn’t think earning 10 times more will make me happier,” he says. “As an academic I can choose what to work on and consider very long-term goals.” Plus, he says, industry grants have started to flow his way as companies realize they’ll soon run out of recruits. This year, he’s planning to increase the number of graduate students he’s training from four to 15.

DeepMind was cofounded two years ago by Demis Hassibis, a 37-year-olddescribed by The Times of London as a game designer, neuroscientist, and onetime chess prodigy. The DeepMind researchers were well known in the scientific community, attending meetings and publishing “fairly high-level” papers in machine learning, although they had not yet released a product, says Bengio.

DeepMind’s expertise is in an area called reinforcement learning, which involves getting computers to learn about the world even from very limited feedback. “Imagine if I only told you what grades you got on a test, but didn’t tell you why, or what the answers were,” says Bengio. “It’s a difficult problem to know how you could do better.”

But in December, DeepMind published a paper showing that its software could do that by learning how to play seven Atari2600 games using as inputs only the information visible on a video screen, such as the score. For three of the games, the classics Breakout, Enduro, and Pong, the computer ended up playing better than an expert human. It performed less well on Q*bert and Space Invaders, games where the best strategy is less obvious.

 

Such skilled computer programs could have important commercial applications, including improving search engines (see “How a Database of the World’s Knowledge Shapes Google’s Future”), and might be particularly useful in helping robots learn to navigate the human world. Google last year acquired several leading robotics companies, including the makers of various types of humanoid robots (see “Google’s Latest Robot Acquisition Is the Smartest Yet.”)

Certainly, large companies wouldn’t be spending so heavily to monopolize talent in artificial intelligence unless they believed that these computer brains will give them a powerful edge. It may sound like a movie plot, but perhaps it’s even time to wonder what the first company in possession of a true AI would do with the power that it provided.

Bengio says not to worry about that. “Industry is interested in applying machine learning, and especially deep learning, to the tasks that they want to solve,” he says. “Those [efforts] are on the way towards AI, but still far from it.”

“Honey Encryption” Will Bamboozle Attackers with Fake Secrets

A new approach to encryption beats attackers by presenting them with fake data.

By Tom Simonite

Ari Juels, an independent researcher who was previously chief scientist at computer security company RSA, thinks something important is missing from the cryptography protecting our sensitive data: trickery.

“Decoys and deception are really underexploited tools in fundamental computer security,” Juels says. Together with Thomas Ristenpart of the University of Wisconsin, he has developed a new encryption system with a devious streak. It gives encrypted data an additional layer of protection by serving up fake data in response to every incorrect guess of the password or encryption key. If the attacker does eventually guess correctly, the real data should be lost amongst the crowd of spoof data.

The new approach could be valuable given how frequently large encrypted stashes of sensitive data fall into the hands of criminals. Some 150 million usernames and passwords were taken from Adobe servers in October 2013, for example.

After capturing encrypted data, criminals often use software to repeatedly guess the password or cryptographic key used to protect it. The design of conventional cryptographic systems makes it easy to know when such a guess is correct or not: the wrong key produces a garbled mess, not a recognizable piece of raw data.

Juels and Ristenpart’s approach, known as Honey Encryption, makes it harder for an attacker to know if they have guessed a password or encryption key correctly or not. When the wrong key is used to decrypt something protected by their system, the Honey Encryption software generates a piece of fake data resembling the true data.

If an attacker used software to make 10,000 attempts to decrypt a credit card number, for example, they would get back 10,000 different fake credit card numbers. “Each decryption is going to look plausible,” says Juels. “The attacker has no way to distinguish a priori which is correct.” Juels previously worked with Ron Rivest, the “R” in RSA, to develop a system called Honey Words to protect password databases by also stuffing them with false passwords.

Juels and Ristenpart will present a paper on Honey Encryption at the Eurocryptcryptography conference later this year. Juels is also working on building a system based on it to protect the data stored by password manager services such as LastPass and Dashlane. These services store all of a person’s different passwords in an encrypted form, protected by a single master password, so that software can automatically enter them into websites.

Password managers are a tasty target for criminals, says Juels. He believes that many people use an insecure master password to protect their collection. “The way they’re constructed discourages the use of a strong password because you’re constantly having to type it in—also on a mobile device in many cases.”

 

Juels predicts that if criminals got hold of a large collection of encrypted password vaults they could probably unlock many of them without too much trouble by guessing at the master passwords. But if those vaults were protected with Honey Encryption, each incorrect attempt to decrypt a vault would yield a fake one instead.

Hristo Bojinov, CEO and founder of mobile software company Anfacto, who has previously worked on the problem of protecting password vaults as a security researcher, says Honey Encryption could help reduce their vulnerability. But he notes that not every type of data will be easy to protect this way since it’s not always possible to know the encrypted data in enough detail to produce believable fakes. “Not all authentication or encryption systems yield themselves to being ‘honeyed.’”

Juels agrees, but is convinced that by now enough password dumps have leaked online to make it possible to create fakes that accurately mimic collections of real passwords. He is currently working on creating the fake password vault generator needed for Honey Encryption to be used to protect password managers. This generator will draw on data from a small collection of leaked password manager vaults, several large collections of leaked passwords, and a model of real-world password use built into a powerful password cracker.