April 4, 2016
Building Bioscience

With a phone call, CT keeps a Yale spinoff home

PHOTO | Contributed
PHOTO | Contributed
Yale University molecular scientist and bio-entrepreneur Craig M. Crews in the lab of Arvinas Inc.
Catherine Smith, commissioner, state Department of Economic and Community Development
HBJ PHOTO | Gregory Seay
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.

Molecular scientist Craig M. Crews, a Yale professor and successful bio-entrepreneur, was in the midst of a fateful decision several years back, involving his latest bioscience venture, when a state official's phone call dramatically altered the course for him and his young company, Arvinas Inc.

His second bioscience startup, one that devised a "platform technology'' now undergoing clinical trials and from which a number of more effective cancer treatments could eventually flow, Arvinas was being heavily courted by neighboring Massachusetts to relocate its research and operations staff to Cambridge – home to one of America's most lucrative bioscience clusters.

Like Yale in New Haven, a number of major universities are clustered in and around Cambridge, including Harvard and the Massachusetts Institute of Technology, essential gateways to talent and ideas that Crews and other bio-entrepreneurs say are their industry's lifeblood.

Then came the phone call that enabled Connecticut to avoid losing a second Crews bioscience startup to another state. What ensued, observers say, not only underscores the extent of Connecticut's commitment to its bioscience buildup, but also illustrates how the state has been able to leverage its investment of capital and incentives into a much more lucrative bioscience pot.

On the other end of the line was Catherine Smith, commissioner of the state Department of Economic and Community Development. Word of Cambridge's pitch to Arvinas filtered to Smith, who was eager to keep the company in Connecticut.

"She called and said, 'I hear you have an offer in Cambridge. What can we do to make this work for you'?" Crews recalled Smith asking. "That phone call from Catherine really set a lot of things in motion.''

"Craig Crews is kind of iconic, so it made sense to call him personally,'' Smith said, confirming Crews' recollection.

The terms for staying in CT

Uninterested in commuting long-distance again after a year of coast-to-coast travel with his previous bioventure based in California, Crews laid out to Smith his terms for keeping Arvinas in his native Connecticut.

The result, according to Crews, who is Arvinas' chief science officer, CEO Dr. Manuel Litchman, and finance chief Sean Cassidy: A forgivable $2.5 million DECD loan in exchange for its commitment to create at least 25 jobs and to remain in Connecticut at least through 2023. It has 35 workers so far. Arvinas in early 2015 obtained the last loan tranche, for which DECD recently notified the company that portion, too, has been forgiven, Cassidy said.

Separately, Connecticut Innovations Inc. (CI), the state's quasi-public technology promoter-financier, participated in Arvinas' series A and B equity-investor financing of $2.3 million, plus CI issued a $750,000 loan to equip its office-laboratory in the Science Park at Yale development, in New Haven's Newhallville section.

Within a month, in July 2013, Arvinas and a handful of staff moved into 9,500 square feet on the third floor of 5 Science Park, space once a lab for a previous bioscience startup. Arvinas has since added another 5,000 square feet or so on the second floor.

"The quickness with which we were able to get this lab up and running is still astonishing,'' Crews said.

Low-cost haven

Connecticut will need more coordinated efforts like these to achieve its bioscience goals, experts say.

Paul R. Pescatello, executive director of the Connecticut Business & Industry Association's Bioscience Growth Council, said that this state's biggest regional bioscience competitor is Massachusetts, which has a similar research tax-credit structure to Connecticut's "that they've not tinkered with.''

According to Pescatello, bioscience startups typically need around $60 million to hire staff, find and equip office/lab space to get going, and as much as $2 billion to clinically test drugs or devices and bring them to market.

For Connecticut to vie with larger, well-established bioscience clusters, it has to "be a cheaper, less costly, more generous rival,'' making incentives like forgivable loans and grants key to nurturing the sector, said Pescatello, also president of the Hartford-based New England Biotech Association.

How companies leverage those incentives is how Connecticut gets its payback.

Led to greater investment

For example, with its lab in place and the balance of its $5.6 million public-private 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 unspecified 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 building 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 payments 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 2003. 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 Arvinas' homepage. In 2012, after receiving federal clearance to market Proteolix's treatment, 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 positive impact in expanding the state's bioscience ambitions.

"Because we have him in this state,'' Smith said, "he's doing all these things to help us build the innovation ecosystem.''

See the other articles in our ongoing Building Bioscience series.

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