Seattle biotech Kineta funds research step by step

Biotech startups are known for burning through huge piles of cash as they do expensive research in hopes of one day hitting the jackpot with a miracle drug.

But in a troubled economy dominated by tightfisted investors, Kineta is trying a new approach. The Seattle-based company in South Lake Union plans to fund its research step by step, relying on revenue-generating deals to undertake the next step in research.

"Our fundraising strategy is to grow in an organic way," said CEO Charles Magness.

Kineta's formula underscores the biotechnology sector's struggle to survive the economic debacle.

Software and other sectors relying on venture capital are suffering from the drop in venture funds and the depressed market for equities.

Biotechnology firms are particularly in bad shape because they need more cash and longer lead times than other budding companies.

Local companies like Targeted Genetics, which has only enough cash to operate through the first quarter of next year, are caught in the crunch.

Magness and fellow Kineta founder Shawn Iadonato started the company last December but unveiled it publicly only this month.

Their new venture quickly came after the $9 million sale of their previous company, Illumigen Biosciences, to Massachusetts-based Cubist Pharmaceuticals. If Illumigen's research and commercial potential fully pans out, its shareholders could get up to $330 million in additional payments from Cubist.

Kineta — which has the scientific backing of University of Washington scientists Michael Gale and Michael Katze — focuses on therapies that could help the immune system fight diseases such as influenza or hepatitis C.

Kineta's strategy is to do early-stage research until it can prove a biotech compound works, then seek a bigger partner that will pay for an interest in the product and do the expensive clinical experimentation and commercialization efforts.

"We're looking for some return to the company in the three-year time frame," as opposed to the nearly decadelong wait many biotechs aim for, Magness said.

Kineta has so far partnered with Cubist for early-stage work on a hepatitis C drug, and has received funding from the National Institutes of Health. But it is also pitching itself to investors.

The company plans to host an investor open house Jan. 15, according to its Web site.

Ángel González: 206-515-5644 or agonzalez@seattletimes.com