Kineta Acquires Multiple Sclerosis, Diabetes Drug Candidates to Test Unusual Biotech Strategy

7/8/09Follow @xconomy

Seattle-based Kineta doesn’t want to grow up to be the next Amgen. It has seen plenty of biotech companies go up in flames when they try to do everything from drug discovery to development, and manufacturing to marketing. Instead, the company sees opportunity in carving out one piece of that product development continuum, doing it well, and hopefully making some money.

Sound odd? It’s all part of an unusual business plan at Kineta, a company formed last year by CEO Charles Magness and chief scientist Shawn Iadonato, who worked together at Seattle-based Illumigen before that company was sold to Lexington, MA-based Cubist Pharmaceuticals. I sat down with them last week at their new offices in Seattle’s South Lake Union neighborhood to hear about the company strategy and its initial case-study—drug candidates it acquired for autoimmune diseases like multiple sclerosis and Type 1 diabetes.

The company was founded on the basic idea that there is a great supply of drug candidates in the biotech and pharmaceutical industries in the preclinical (animal testing) phase, but little demand for those products until someone generates evidence they work in human trials, Iadonato says. On the other end of the spectrum, there’s great demand from patients for new therapies, but a slim supply of really promising drugs in the late stages of development to meet the demand. The Kineta group, through work at Illumigen and other companies, showed they were skilled at taking relatively untested drugs through the late preclinical and early-stage clinical trials—steps that often trip up larger companies, and take a lot longer than they think.

So the Kineta concept is to cast about for promising drug candidates in animal tests, acquire licenses for pretty modest terms, run them through early-stage clinical trials on a strict budget of time and money, and then form a partnership with a bigger drugmaker who has the money and manpower to run bigger trials needed to win FDA approval for a new drug. If all goes as planned, Kineta will collect the usual upfront payments on these deals, milestones from success in later development, and royalties on product sales if they ever become marketed products. And they’ll repeat the cycle many times over. Essentially, they plan to do a couple of essential drug development steps well, and let other people try to be the next Amgen or Genentech.

“A lot of biotechs are built on ill-defined timelines, and ill-defined amounts of investment, and poorly defined commercial evaluation endpoints,” Iadonato says. “They lack clarity on time and cost.”

Kineta came to this conclusion because, as anybody who follows the business knows, biotech is almost insanely risky. It generally takes a decade or more and hundreds of millions of dollars to develop a new drug, and only about one out of every 10 candidates entering clinical trials ever becomes an FDA approved product. Lots of venture capitalists have been burned, and it’s a popular complaint to say the venture financing model for biotech is broken.

The first real test of this model at Kineta is a drug that comes from the venom of the sea anemone. The company just acquired an array of compounds from Redwood City, CA-based Airmid, which was working to build on research of George Chandy at the University of California, Irvine. The idea is to come up with drugs that tamp down autoimmune diseases, which are caused by the immune system going haywire and attacking healthy tissue like it would an invading virus.

Many of these conditions—rheumatoid arthritis, multiple sclerosis, lupus—have been treated historically with broad-acting immune-suppressors that tamp down inflammation but also cause side effects. One of the big concerns is disabling the immune defenses, and making people vulnerable to infections. Even with newer-generation, more selective immune-suppressors, like Amgen’s etanercept (Enbrel), this vulnerability to infection remains one of the drawbacks.

Kineta’s newly licensed drugs are supposed to be even more selective than that, disabling the part of the immune system that’s causing damage, while leaving the important parts intact, Iadanato says. The compounds are made to specifically block Kv1.3 potassium channels, which is supposed to suppress the action of effector memory T cells of the immune system. Something about the way the sea anemone evolved made its venom a highly potent and selective blocker of these potassium channels, Iadonato says.

The plan is to refine the manufacturing processes of this peptide drug so the company can take the drug into its first clinical trial in 15 months, Magness says. Within three years, Kineta plans to get through Phase I clinical trials, when it will seek a partner to help with the big trials needed for a disease like multiple sclerosis, while possibly retaining ownership of a rare condition that a small company can manage on its own, Magness says.

If Kineta can pass through those early trials, it could reap some relatively significant awards, since it’s a small company with 11 employees. The average upfront partnership payment in the biotech industry over the past 18 months, for drugs that completed Phase I trials, was $48 million, Magness says.

There are quite a few big competitors pursuing the Kv1.3 potassium channel target, including Merck, GlaxoSmithKline, and Amgen, Magness says. It’s unclear how far along they are in trials, or whether they are ahead of Kineta, he says. He’s confident that his company will find a niche here, at least partly because Chandy discovered the pathway, and has spent years searching for the optimal drugs to hit the target.

Kineta might not be the kind of company that ever makes glamorous headlines, or that will get patted on the back by economic development types as a paragon of Seattle biotech. But it might provide a return on investment that many other biotechs struggle to ever achieve.

“We’re not looking to build a huge enterprise,” Magness says. “We’re focused on what we’re good at. We’re not trying to overreach. It’s a more rational investment model”

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