Hartford Business Journal

18 Hartford Business Journal • April 4, 2016 www.HartfordBusiness.com budget are at risk, much of the state's com- mitment to the bioscience sector continues to be in the form of state bonding. Republican state Sen. Toni Boucher, whose district includes Fairfield County, where Ger- man drug maker Boehringer Ingelheim and other bioscience companies and venture- capital firms are housed, says she's an ardent supporter of Connecticut's bioscience efforts. The millions the state committed to Jackson Lab, stem-cell research and related ventures, Boucher said, have been well worth it to the state's current and future economic prospects. "That is one bright spot … that we can hang our hat on,'' Boucher said. "We should continue and we should do more, especially in the way we treat startups and the way in which we fashion tax credits.'' Boucher acknowledges that, without its bioscience sector, the impact of the Great Recession on Connecticut's economy might have been much worse. Last week, Malloy said the state's bioscience industry employed 50,000 people at 800 companies. As for fears that Connecticut's fiscal woes will dampen the state's investment in bioscience, the state senator said, "No ques- tion, there's a concern there.'' R&D investment Much of Connecticut's achievements in bioscience are the result of its gener- ous financial seeding of such ventures. Connecticut presently has three varieties of R&D tax credits, including for biosci- ence/biotech companies that relocate to the state. New Haven biopharma executive Mary Kay Fenton, co-chair of the Connecti- cut Business & Industry Association's Bio- science Growth Council, said that every $1 of state R&D tax-credit investment triggers about $7 of private investment in bioscience research for drugs and treatment regimens. The state's fiscal crisis, however, has renewed fears as to which R&D credits will remain and whether eligible filers will be able to maximize their use. Many recall Malloy's unsuccessful push in spring 2015 to cut in half the amount of tax credits a company could use to offset its annual tax liability, a move that many industry officials warned would encourage larger, more mature bioscience firms to move to other states, like Massachusetts, with more favorable incentives. Malloy insisted there is no present effort to alter access to, and use of, R&D tax credits. Former pharmaceutical executive turned bio-entrepreneur Susan Froshauer, who is now president and CEO of Connecticut United for Research Excellence (CURE), a nonprofit bioscience network, educator and lobby, says even the threat of reducing R&D tax credits can echo rapidly through the bioscience com- munity and can have a major impact. James Baxter, senior vice president for development at Boehringer Ingelheim, said access to R&D credits was a factor in the bio- pharma's decision to invest $100 million in a pair of high-tech research and development buildings completed two years ago on its Ridgefield campus. Boehringer considered, Baxter said, other regions of the U.S., as well as China and Germany, to relocate the drug R&D operations now housed in the pair. In the end, Baxter said, Connecticut, which Boehringer chose to locate its U.S. arm in 1971 because of its proximity to New York City and Boston, and their network of research universities, teaching hospitals and capital sources, won out. The new build- ings also anchor Boehringer more deeply into the state, where it has about 2,700 Con- necticut residents on its $24.3 million yearly payroll, plus spending $84 million a year with some 3,000 in-state vendors, he said. "This is where Connecticut has an advantage,'' Baxter said, "because we're already here.'' Boehringer is known for its heartburn drug Zantac and Dulcolax laxa- tive, among others. Not everyone is enamored with Connecti- cut's bioscience push. State Rep. John Piscopo (R-Thomaston) is critical of Connecticut's efforts to bring Jackson Lab to the state. Pis- copo argues the state's bioscience ambitions would have been better served by first invest- ing in UConn's research capabilities, along with upgrading pre-existing bioscience facilities. "I'm very happy that Jackson Lab has hired 200 people,'' said Piscopo, a member of the legislature's Finance, Revenue and Bonding Committee, adding, "I don't believe they needed to take taxpayer money to do it.'' He was referring to the $291 million Jack- son Lab received to build its 189,000-square- foot research facility in Farmington. Malloy's Bioscience CT initiative was credited for helping to attract Jackson Lab. Bearing fruit Joshua Newton is CEO of the UConn Foundation, a nonprofit affiliate that is a conduit for donations and endowments, including ones for bioscience and other technology, from the school's alumni and individual and corporate supporters. According to Newton, Connecticut's seed investments in stem-cell research and other bioscience initiatives have generated world- wide awareness of the state's bioscience ambitions and also loosened UConn support- ers' pursestrings to the foundation. "We need the scholarships and fellow- ship support,'' Newton said. "I don't antici- pate that going away.'' UConn Provost Mun Choi, in recent legislative testimony, declared that the state's Next Generation CT initiative – a complementary program to Bioscience CT that will invest hundreds of millions of dol- lars to boost UConn's faculty and pupils in STEM fields — has helped the foundation raise $81 million to date. Newton ticks off a list of corporate donors that have in recent years given or pledged their support: United Technologies, $10 million; Eversource, $9 million; General Electric, $7.5 million; and Fraunhofer, $7.2 million. Connecticut's deep pool of bioscience talent, too, has been an advantage. Major pharmaceutical firms like Pfizer, Bayer, Boehringer and Bristol-Meyers Squibb either have or had operations in the state. Over the years, as those companies have cut back or eliminated their in-state presences, their employees have spun off to start their own bioscience firms or sign onto young startups like Arvinas LLC in New Haven. Arvinas CEO Dr. Manuel Litchman said declining jobs in academia and at large drug makers are driving seasoned talent to his pharmaceutical company and others. Arvi- nas, for instance, landed a renowned research scientist, plus his entire research team, when a Long Island, N.Y., biopharma closed its doors. Moreover, Litchman said bioscience start- ups are drawing job interest among Millenni- als who are "excited and energized,'' Litchman said, at the prospect of either starting their own company or being involved in shaping a com- pany and its technology from the ground up. According to state Labor Department estimates, Connecticut will add 18,713 STEM jobs between 2012 and 2022, growing the workforce to 185,075. Of the STEM jobs added, nearly one in six, or 3,000 jobs, will be in life sciences, the agency estimates. Meantime, where to house and educate those workers and their families will pose an ongoing challenge for home and apart- ment builders, landlords and the communi- ties in which they are built. Farmington, home to UConn Health Center, Jackson Lab and other bioscience actvity, has undergone an explosion of new commercial and residential development. Apartment landlords with properties in and around Farmington report low vacan- cies and high demand among existing liv- ing units. Developers in neighboring West Hartford have been scrambling to erect new apartments to tap into that demand. Local, global reach Connecticut's bioscience story has cir- culated globally. Dozens of Israeli biosci- ence and other technology firms are eyeing Connecticut, eager to use it as a gateway into the vast U.S. marketplace. At least one of those firms that located in Cromwell, Biological Industries, confirmed recently that another key reason for choos- ing Connecticut was the chance to locate near Jackson Lab, a potential customer/ partner with its line of cell-growth media. Biological Industries and other bioscience newcomers to Connecticut cite access to a well-educated workforce of scientists and related professionals. Many of them previ- ously worked at the large drug makers cur- rently or formerly active in the state, along with ex-workers at several of Connecticut's homegrown biopharmas, including Achil- lion Pharmaceuticals, Rib-X Pharmaceuti- cals and former CuraGen and Genaissance Pharmaceuticals. "Bioscience jobs, in the aggregate, are well-paying jobs because the people are well- educated,'' said Fenton, the CBIA bioscience council co-chair and executive vice president and chief financial officer at Achillion, which is developing treatments for hepatitis C, HIV and other blood-borne ailments. "These peo- ple are well-informed, engaged, voting elector- ate serving on local community boards.'' n investment in hand, Arvinas managed to attract additional private financing and other licensing revenue, Arvina's finance chief Cassidy said. Last April, drug giant Merck agreed to a drug-development collaboration with Arvinas to which Merck provided Arvinas an unspeci- fied upfront payment. The pact also allows Arvinas to collect as much as $434 million more in payments and royalties from Merck in return for rights to Arvinas' small-molecule drug regimen that degrades the protein build- ing blocks in certain cancers, Cassidy said. Also, last October Arvinas signed a deal with drug maker Genentech that could pump $335 million more revenue into the startup. After the Genentech deal, Arvinas raised $41.6 million in a private equity placement. In all, Arvinas, Cassidy said, could reap in excess of $750 million of milestone pay- ments through its relationships with Merck and Genentech. The next big thing Crews, who has been on Yale's staff since 1995, launched his first bioscience venture, Proteolix, in San Francisco in 2013 after the Great Recession thwarted his efforts to ramp it up in Connecticut. Crews developed its lone drug to treat multiple myelomas, or blood tumors. In 2009, Crews and his business partner sold Proteolix to Onyx Pharmaceuticals for more than $800 million, according to Arvi- nas' homepage. In 2012, after receiving fed- eral clearance to market Proteolix's treat- ment, Krypolis, Onyx sold Proteolix and its related patents to AmGen for $10.4 billion. Krypolis is projected to generate more than $1 billion in sales annually. Time will tell whether Arvinas is Crews' next bioscience home run. But DECD's Smith said the presence of both in Connecticut already is having a posi- tive impact in expanding the state's bio- science ambitions. "Because we have him in this state,'' Smith said, "he's doing all these things to help us build the innovation ecosystem.'' n Yale spinoff CT's bioscience H B J P H O T O | G R E G O R Y S E A Y Sean Cassidy, chief financial officer of Arvinas Inc., says the startup has leveraged Connecticut's $5.2 million stake into potential revenue totaling hundreds of millions.

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