Investment of the Year – Kite Pharma

Of all the different types of university research to be commercialised, biotechnology is perhaps the most difficult. There are multiple pitfalls, including high failure rates, drugs being blocked by regulators and management clashes that can cause a company to stagnate Any of these may scupper biotech as it is translated from labs to reality. But the most prominent problem is funding.

The ideal amount needed to bring a new drug to market stands at around $1bn.

The funding biotech attracts needs to be flexible, and backed by investors who understand that a 10-year venture investment will not suffice when the average biotech development needs 15 years before its ready to go. Furthermore, biotechs need critical mass behind them to get the ball rolling. Diluted rounds of a million dollars or so spread thin over multiple biotechs will result only in multiple failures due to underfunding.

This is where Kite Pharma stands out from its peers. The University of California Los Angeles spin-out secured $35m in series A funding earlier in the year, providing the company with a solid foundation on which it has a greater chance to breed success. Life sciences venture capital firms Alta Partners, Pontifax and Commercial Street Capital were joined by Kite’s founder, Arie Belldegrun, and alternative investment firm TPG Group co-founder David Bonderman in the round.

However, it is not the size itself that has attracted our attention. Rather, it is that this investment sets the bar for what the future of biotech fundraising needs to look like in order to prosper.

Currently, companies like Kite Pharma stand apart – a rogue anomaly of solidarity from investors among a sea of start-ups perceived to be high-risk backed by noncommittal investments. Biotech investment seems to be approached in much the same way as a lottery ticket is bought – get in cheap with good odds on a massive reward – and is about as futile. A lottery, with its millions-to-one odds, is essentially a tax on idiocy. In much the same regard, hedging small bets on underfunded biotechs on the off chance one may make it big smacks of cognitive redundancy.

Companies such as Kite Pharma, which is developing a cancer treatment which turns the body’s immune system against cells with uncontrolled growth, are not opportunities to make quick cash from nothing. They are companies requiring substantial support. Once successful, they can save millions of lives while making billions of dollars. They are not a quick app knocked out for a platform that will be obsolete in two years. They are endeavours that can prove hugely beneficial to people worldwide.

Kite Pharma’s series A demonstrates a will of both the company and its investors to insure that its game-changing cancer therapies make it to market, and sets a standard to which all biotech start-ups and potential backers should aspire.

It is for this reason we have named Kite Pharma the Global University Venturing 2013 Investment of the Year.