Hartford Business Journal

8 Hartford Business Journal • December 5, 2016 www.HartfordBusiness.com generous financial backing from the state, to establish Connecticut as a budding hub of bioscience innovation and entrepreneurism. Achillion, Alexion, CuraGen, Genais- sance, Neurogen, Rib-X and Vion. All but Neurogen and Vion still exist, in one form or another and in the memories of those who worked there, with Alexion achieving so far the greatest market success and wealth. Col- lectively, the seven's science has been used to decipher the human genome in order to devise efficacious treatments for diseases ranging from hepatitis C and kidney disease to psychiatric maladies. "These companies don't die,'' said Harry Penner, a serial Connecticut biotech entrepre- neur who once ran Neurogen and co-founded Rib-X, now Melinta Therapeutics. "They, in a sense, became transformed. But so do the people. They're still at it in other ways.'' Those "seven sis- ters,'' as they are loosely known in peer cir- cles, also collectively have left behind, observ- ers say, an invaluable legacy to the state's bioscience industry: They were responsible for recruiting and retaining much of the sci- entific, administrative and investment talent that exists today in Connecticut. Their other enduring contribution, accord- ing to current and former bioscience owners, executives, financiers and advisers, is that they elevated the visibility of Connecticut, particularly New Haven, among the ranks of older, more notable bioscience clusters, including Boston-Cambridge, Mass., and San Diego/San Francisco/Palo Alto, Calif. The visibility and continued nurturing of Connecticut's bioscience ecosystem is a key reason The Jackson Laboratory for Genomic Medicine opened in Oct. 2014 adjacent to UConn Health Center in Farmington. That same month, Icahn School of Medicine at Mount Sinai debuted its genetic testing lab in Branford. The contributions of the seven to Con- necticut continue to echo well after the depar- ture of drug giants Bayer and Bristol-Myers Squibb, both of which over the years recruited hundreds of scientists and biopharma execu- tives to Connecticut, some of whom eventu- ally launched their own startups. Pfizer Inc., which once had a major research presence on the shoreline, has sharp- ly curtailed its footprint there. Meantime, Ger- man drug maker Boehringer Ingelheim con- tinues to grow its U.S. research operations — and staffing — in Ridgefield. What Connecticut lacked then but boasts today, is the "critical mass'' of scientific and entrepreneurial talent, plus a notable track record of public and private funding to further grow and sustain its bioscience ambitions. "That's where those seeds were being planted and developed,'' said Dave Wurzer, a former CuraGen officer who is chief invest- ment officer at Connecticut Innovations Inc., the state's quasi-public technology promo- tions and investment arm. "All of those seeds gave rise to a critical mass of bioscience companies that were able to attract scien- tific talent from around the country.'' 'Golden period' Hartford serial bioentrepreneur Dr. Gual- berto Ruano, who co-founded Genaissance Pharmaceuticals in New Haven, now part of a larger bioscience company, describes the period from the late '80s until the bursting of the "tech- investment bubble'' in 2001 as "a golden period.'' "Those were the days when the internet broke ground as an industry,'' Ruano said, "and genomics was riding the coattail of the internet boom.'' In September, Ruano sold the remainder of his second biosci venture, Genomas Inc., a Hartford provider of genetics-based test- ing to facilitate more effective, personalized treatments for mental illness, diabetes and cardiovascular disease, to a Florida health- software maker for $1.75 million. Kevin Rakin, a co-founder of Genais- sance, which raised $60 million in 2000 as one of Connecticut's first bioscience initial pub- lic offerings, credits Ruano as "one of the first people in the world to articulate the idea of person- alized medicine. He sketched it out for me on the back of a napkin at a New Haven pizza parlor." During that period, many biosci startups in Connecticut and around the country were eager to harness work done to map the entire human genome as a doorway into genetic- based treatment of disease. However, the "dot.com" crash in 2001 sucked the wind and investment in technology, especially genetic research, observers say. That prompted a global search among bio- science companies for molecular compounds that could be licensed for development into drugs as a way of generating revenue and profits to appease skeptical investors. The companies that had successes in drug development, like Alexion, Achillion and Rib-X, are still independent. Others, like Genaissance, Neurogen and Vion, either no longer exist or lost their independence. CuraGen was sold in 2009 for $95 million to New Jersey's Celldex Therapeutics. Despite the lack of a formal support infrastructure, people in and around the state's nascent biosci sector were open then to new ideas, many of them bandied between researchers/executives at the seven, said Rakin, who for a time was Genaissance's CEO. Genaissance merged with Clinical Data Inc., of Newton, Mass., in 2005. "We had a wild ride,'' said Rakin, found- ing partner of Baltimore life-sciences ven- ture investor HighCape Partners and a board member of Connecticut United for Research Excellence (CURE), the state's chief lobby- ing and promotional arm of the bioscience industry. "We felt like we could do anything.'' Budding industry To get a sense of where Connecticut's bioscience industry emerged and how far it's come, it's helpful to understand the eco- nomic climate at that time. The U.S. economy was tracking favorably in the late '80s, driven largely by a lengthy bull stock market. Flush investors were swept up in the technology sector, especial- ly companies seeking to exploit what many saw as the wealth potential of the internet. In 1992, Congress enacted legislation empowering the nation's colleges and uni- versities to leverage their research, patents and other intellectual property into busi- ness ventures. In Connecticut, Yale, whose medical and technology professors for years had pursued solo commercialization of their research, quickly seized on the opportunity to coordi- nate and facilitate those startup efforts — a pivotal event for drawing interest and money to the sector, observers say. All seven Connecticut bioscience start- ups can trace their roots directly or indirect- ly to Yale. In the last 20 years, the university has launched some 60 biotechnology com- panies that have raised more than $1 billion in professional venture capital, said Jon Sod- erstrom, managing director of Yale's Office of Cooperative Research. Yale also financed development of Science Park out of a col- lection of drab industrial buildings in New Haven's Newhallville neighborhood, where most of the seven had lab-office space. "I don't think anybody's arguing our suc- cess,'' Soderstrom said. Another crucial development occurred in 1999, when state lawmakers embraced a vital funding format that invigorated many of its homegrown bioscience companies. Most startups consume loads of cash for salaries, rent, office furnishings, marketing and other overhead, yet with no product per se to sell, they lack revenue and profits. Banks and many investors are uncomfort- able with lopsided balance sheets like those, and alternative financing sources are few. "We were investing tens of millions of dollars in [research and development] but we weren't making any money,'' Wurzer said of biosci investors at the time. But the administration of then-Gov. John Rowland and Connecticut lawmakers, with a nudge from CURE, which was a fledgling bioscience trade-lob- by at the time, rode to the rescue. L a w m a k e r s ' approval of legisla- tion allowing start- ups in bioscience and other industry sectors to convert their operating loss- es, beginning with the 2000 income year, into tax cred- its that could be converted to cash to fund their operations was instrumental in launching the sector at home, experts say. Under the ongoing program, the state buys back the credit at 65 cents on the dollar, up to $1.5 million per corporation, according to the state Department of Revenue Services. In the fiscal year ended last June, Con- necticut approved 72 credit exchanges total- ing over $7.6 million. Through the first four months of fiscal 2017, the state's R&D credit buybacks are up 10 percent to $1.4 million vs. $1.3 million the same period a year ago. "That was a crucial step forward in sup- port of the bioscience cluster,'' Wurzer said. The tax-credit program prompted Yale to ramp up its commercialization efforts, which in turn, drew the attention of the state's flag- ship research university, UConn, observers say. Dr. Timothy R. Shannon is a Connecti- cut venture capitalist and former bioscience executive whose fingerprints are on many of the seven early Connecticut biopharmas as well as today's newer startups. Shannon is managing partner of Canaan Partners, which has invested billions worldwide, and who sits on the advisory board of Connecticut Innovations. He said many of the folks working in bio- science during that time are still active and regularly connect with each other. That, Shannon says, is where Connecti- cut derives maximum benefit. "The legacy of those pioneers in Connecti- cut is their experience — and that most of them are still here, and still helping to build the next generation of innovative start-up companies,'' he said. n Bioscience Connecticut's '7 sisters' Company Founded Status CuraGen 1991 Since 1999, a Branford unit of New Jersey's Celldex Therapeutics Inc. Alexion 1992 Publicly traded with a market value as of Nov. 29 of $28 billion Achillion 2000 Publicly traded with a market value as of Nov. 29 of $573 million Neurogen 1987 Assets sold for at least $11 million in 2009 to Ligand Pharmaceuticals, San Diego, Calif. Genaissance Pharmaceuticals 1997 Still in New Haven, it sold for $55 million in 2005 to Clinical Data Rib-X Pharmaceuticals 2000 Renamed Melinta Therapeutics in 2013; privately held, based in New Haven Vion Pharmaceuticals Inc. 1999 Defunct since 2009 S O U R C E : C O M P A N I E S N A M E D ; I N D U S T R Y D A T A B A S E S P H O T O | C O N T R I B U T E D Building Bioscience A N H B J S E R I E S O N C T ' S B I O S C I E N C E S E C T O R from page 1 Seeding a new generation of startups Connecticut venture capitalist Harry Penner (right) staked some of this state's earliest bioscience startups. With Penner is Trumbull lawyer Anthony Sabatelli.

• Cover