Kitea Health chief executive Simon Malpas. Photo / Alex Burton
After winning spots on two FDA fast-track programmes, and the first implant of its fluid pressure sensor for a child, Auckland’s Kitea Health is $7 million and counting into a $10m funding round.
Start-up founders are often coy about their end game. An IPO? A trade sale? Taking on the world?
Kitea Health co-founder and chief executive Simon Malpas is straight-up.
“Our target is to be acquired once we get FDA approval,” he tells the Herald.
He sees his firm’s world-first implantable sensor chip, which wirelessly measures fluid pressure on the brain, as appealing to “a big strategic [player] who can roll it into their sales and marketing teams around the world”.
Malpas has done it before. He founded two spin-outs from Auckland University research: Telemetry Research – also based around wireless implants – sold to US medtech Millar in 2012 after reaching $3 million in revenue, and Kaha Sciences, a maker of wireless health sensors for animals bought by the multinational AD Instruments in 2020. Both deals were on undisclosed terms.
Things are starting to heat up for his third startup, with Kitea Health hitting several milestones in recent weeks.
January the saw the first implant for a child.
The procedure will help children like five-year-old Kaden Brown, who was born with hydrocephalus, a neurological disorder that leads to a dangerous build-up of cerebrospinal fluid deep within the brain.
A shunt was surgically implanted to drain fluid and relieve excess fluid. But shunts have the highest failure rate of any medical device. Malpas says around 40% fail their first 12 months of use. Kaden’s parents had been living on a knife edge. A blocked shunt can become life-threatening within 24 hours. A Kitea implant could provide an early warning.
Eleven adults are also on the 8-month-old trial, which is being run out of Auckland Hospital. The full effort will run to 10 adults and 10 children.
It’s life-saving tech: fluid build-up can cause irreparable brain damage or death, if pressure builds too long undetected. But it’s also time-saving. Around 70% of the time when people turn up in the emergency room with symptoms that suggest their shunt might be failing, it’s a false alarm, Malpas says.
“Our first human trials have gone exceptionally well,” says Malpas, who also serves as a professor of physiology and bioengineering with Auckland University.
There was one surprise, but it was a positive. “We started as a medical device company but discovered we’re also a data company,” Malpas says. “We now realise there’s a difference in people’s brain pressure between morning and the night, and some quite big differences when they stand up or lie down. That might be understandable with gravity, but morning and night – no one knew about that.”
The firm has already raised some $14m in grants, and staged a $6m seed raise in 2023.
Last year, the firm was angling to raise a $20m Series A round, but Malpas says it ran into a tough venture capital market.
It’s now staging a $10m “pre-Series A” raise, with a hybrid set-up, at a $35m pre-money valuation. The round has been led by existing investor Icehouse Ventures. The final couple of million is being raised through Snowball, with a $5000 minimum investment. Malpas says it’s the first time Kitea has opened the door to retail investors.
A full-blooded, $20-$25m Series A round is planned for later this year to fund a 150-person trial in the key market, once the US Food and Drug Administration (FDA) gives the green light. The firm told Snowball investors: “This round will commence in the second half of 2025 and will likely involve significant strategic and US-based medtech venture capital investment.”
Malpas hopes to receive the FDA go-ahead in October, which set the stage for US human trials beginning early next year.
In an encouraging sign, the US regulator has recently given Kitea on to a clutch of programmes aimed at accelerating progress through its assessment process.
“On the back of being designated as a Breakthrough Device by the FDA, we have also secured a place on the FDA’s fast-track programme called Total Product Lifecycle Advisory Program (TAP). We are one of only 65 companies worldwide to have this. It’s massive for a Kiwi company to be on this list. The big implication of this is a quicker path to reimbursement [by insurance companies] in the US,” Malpas says.
The FDA’s medical device approvals team hasn’t been hit by the Trump administration’s sweeping federal spending cutbacks, the Kitea CEO says. Industry giants like Medtronic have to pay huge fees, which funds most of the process.
Even under fast-track, the human trials in the US would last a minimum two years. FDA approval for full commercialisation could be three to four years away, he says.
“Ninety-nine percent of other medical devices just have to show safety because they’ve got predicates. Because of our novelty, we not only have to show safety, but clinical usefulness.”
Once it does get over the line, Malpas says a US$2 billion ($3.5b) addressible market awaits, with around 1 million hydrocephalus sufferers in the US alone. According to an investor Q&A on Snowball Effect, Kitea is aiming for a US$12,000 list price for its implant and wand in the US, with an 80% gross margin.
“There are currently no intracranial pressure monitors that enable at-home use. The Kitea system is the first in the world,” the firm says.
There is an in-hospital only competitor, the “M.scio”, but it can only be used with a shunt made by its parent company, Miethke, whereas Kitea’s implant will work with any brand of shunt, the firm says.
Kitea’s also says in its Q&A that larger medical device manufacturers like Metronic “tend to acquire innovation instead of developing it themselves”.
As a pre-commercial company, there’s really only one meaningful financial metric that Kitea can give potential mum-and-dad investors on Snowball Effect: Cash burn, which it puts at $635,000 per month.
The raise now available to Snowball Effect users has a $7m minimum (already beaten with $7.3m committed) for 19% equity and a $10m ceiling for $25% of the company, implying a post-money valuation of $40m.
“A $7 million raise will provide the company with an 18-month runway, based on existing cash reserves, expected grant funding, and current monthly cash burn. This funding is critical to advancing the company’s clinical trials and securing FDA approval.”
Some $2.2m in Kitea’s grant funding so far has come from the soon-to-be-extinct Callaghan Innovation. The Crown agency will be defunded on June 30, with its grants programme shifting to MBIE, with the finer details pending.
The last few months have also seen the loss of the $68m per year National Science Challenge (introduced by Steven Joyce a decade ago) and the Goverment declining to top-up the now-exhausted $300m Elevate Fund, which was used by the Crown to coinvest in startups (the outgoing Labour Government had not committed to a refresh, either).
Malpas earlier expressed concern that it could be more difficult for future startups to follow in Kitea’s footsteps.
One area of reform has tilted in his direction however. Kitea received a $12m grant from MBIE’s Endeavour Fund in 2017, but in late 2023 Malpas railed that the $246m fund was “failing in its core mandate to fund research that can transform the NZ economy” with local health-tech firms, and others who could boost our GDP and productivity were seeing little of the action, which leaned toward blue-sky science and “tackling long-term social issues”.
In December, the Government announced an effective end to Marsden Fund grants for humanities and social sciences, along with a requirement that 50% of grants show an economic benefit to the country.
Chris Keall is an Auckland-based member of the Herald’s business team. He joined the Herald in 2018 and is the technology editor and a senior business writer.
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