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Originally published June 6, 2010 at 10:00 PM | Page modified June 7, 2010 at 11:30 AM

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Seattle biotech Kineta wins over heartfelt funding

Kineta's latest investor is a charitable foundation created by former Chrysler Chairman Lee Iacocca, who lost his wife to diabetes, to spur its effort to develop a drug to fight autoimmune diseases, including type 1 diabetes and multiple sclerosis.

Seattle Times business reporter

Kineta

Headquarters: Seattle

Year founded: 2007

Employees: 15

Research focus: Multiple sclerosis, type 1 diabetes, rheumatoid arthritis, anti-viral medicines and vaccine boosters

Source: Kineta

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Seattle biotech company Kineta is betting that a toxin from a Caribbean Sea anemone can stop autoimmune diseases, including type 1 diabetes and multiple sclerosis. The compound shows promise in animals. But in a tough market, where does a small startup find the kind of money and patience to support lengthy clinical trials to determine whether it works in humans?

The heart, it turns out, is a strong motivator. Kineta's latest investor is a charitable foundation created by a famous executive who lost his wife to diabetes.

Kineta is announcing a new partnership with the family foundation of Lee Iacocca, the former Chrysler chairman who is funding diabetes research in honor of his first wife, Mary. The Iacocca Family Foundation is investing in Kineta to spur its efforts to develop the new drug, called ShK-186.

"They want a drug," said Shawn Iadonato, Kineta's chief scientist. "The financial consideration is secondary.

"A venture capitalist is ultimately indifferent," he said. "They want a return on investment."

The foundation is not releasing the amount of its investment but says the deal with Kineta is structured like a program-related investment and is less than $1 million. In 2008, the foundation made a $3 million equity investment in Silicon Valley biotech company Bayhill Therapeutics for work on type 1 diabetes. That infusion paved the way for Bayhill to attract additional matching funds.

The partnership is an example of how foundations are recasting the model of philanthropy, investing in promising work to advance treatments, both from the commercial sector and academic research. With an equity stake, there's the potential for a double payoff if the company succeeds.

Funding from nonprofits is unusual for a biotech company, says Kineta Chief Executive Charles Magness. But it helps Kineta build a more stable and diverse funding base.

"We're broadening our options so we don't get stuck relying on any one funding source," Magness said.

Founded in 2007

Magness and Iadonato founded Kineta in 2007 after working together to develop an anti-hepatitis C drug at Illumigen Biosciences, which they later sold to Cubist Pharmaceuticals. Kineta has raised about $15 million so far, including private equity, government grants and contracts, and investments by corporate partners.

Kineta is focusing its science on enhancing the human immune system and its business model on bridging the gap between basic research and commercialization. It's acquiring and advancing potential drugs through the pipeline, channeling new compounds that have worked well in animals through the first stage of clinical trials.

"It's what the big companies think is very risky," Magness said. The earliest stage of clinical trials is the farthest from being able to help their bottom line, so pharmaceutical companies are less willing to do the work themselves.

"Critical turning point"

However, for drug development "it's a critical turning point," he said. "If it's successful, it will reduce anxiety that some toxicity will torpedo the program."

Once the initial viability has been demonstrated, Kineta will look for a larger commercial partner to do the more advanced trials needed for FDA approval.

Type 1 diabetes usually strikes people at a young age, and unlike type 2, it can't be managed with diet or exercise. Type 1 affects about 3 million Americans, who require injections of insulin; no new treatments have been developed for more than two decades.

"We have all these new technologies, telecom and the Internet, but no new technologies in the disease area where people are being treated the same way they were 20 or 30 years ago," Iodonato said.

Kineta licensed the ShK-186 technology last July from Airmid, a private pharmaceutical company, and the University of California, Irvine, based on research by UCI professor K. George Chandy. Kineta plans to take ShK-186 into the first phase of human trials later this year.

It works by blocking some of the white blood cells that trigger inflammation in autoimmune diseases. With type 1 diabetes, the body attacks cells in the pancreas that produce insulin. In people with MS, the body attacks the myelin sheath that protects nerves.

Narrower focus

If ShK-186 is successful, it may have fewer side effects than existing drugs because its focus is narrower. It targets a specific kind of blood cell — effector memory T-cells — without causing general immune suppression.

That means other immune functions can proceed as normal, allowing the body to fight viruses, infections and cancer.

Kristi Heim: 206-464-2718 or kheim@seattletimes.com

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