April 4, 2016
Building Bioscience

Amid budget headwinds, CT's bioscience gains solidify

PHOTO | Pablo Robles
PHOTO | Pablo Robles
Researchers toil at Jackson Laboratory's state-of-the-art office-lab in Farmington, which bristles with the latest use of interior space-design that can be reconfigured any number of ways to maximize effective use of the space.
PHOTO | Contributed
PHOTO | Pablo Robles
PHOTO | Pablo Robles
PHOTO | Contributed
Gov. Dannel P. Malloy and UConn trustees’ board chair Larry McHugh celebrate a Bioscience CT milestone in Oct. 2012.
PHOTO | Contributed

They are three of the most tangible milestones in the ongoing evolution of Connecticut's bioscience ecosystem:

In Farmington, Maine bio-research firm Jackson Laboratory's state-funded outpost on the UConn Health campus hired ahead of schedule the 200 highly-paid workers to which it promised in return for millions in state assistance. Now, Jackson Lab is laying plans to hire its next 100 workers, and to erect a second building to house many of them.

In New Haven, Alexion Pharmaceuticals, one of the world's most rapidly successful and richest biopharmas ever with roots in Yale University, relocated its 500 workers from Cheshire into a $140 million office tower in the Elm City.

In Branford, New York's Icahn School of Medicine at Mount Sinai, with a $9.5 million Connecticut state loan, constructed its genomic research center, where it has pledged to create 142 new jobs by 2020.

But they are only part of the story of Connecticut's gradual ascension in the bioscience space. Five years after the state agreed to invest nearly a billion dollars in its bioscience infrastructure, and decades after the industry sprouted here, Connecticut, observers say, has begun to mount a critical mass of research talent and entrepreneurial zeal to support and sustain its bioscience ecosystem.

The industry's recent growth also likely saved the state from falling deeper into economic despair following the Great Recession.

More than anything else, observers say, the industry's growth reflects the commitment from the state's bioscience entrepreneurs and scientists, public policymakers, its top public and private universities and others, to stake Connecticut's bioscience flag.

What the industry eventually evolves into, however, is still anyone's guess.

Second tier of bioscience clusters

Connecticut is still among what many in domestic bioscience circles consider the "second tier'' of bioscience clusters, outflanked by areas like the Boston/Route 128 corridor; northern New Jersey; North Carolina's "Research Triangle"; Austin, Texas; and San Diego, Calif. This state still lacks, observers say, the density of intellectual and investment capital that characterizes the "mega-clusters."

Some also worry whether the state can sustain its commitment to the sector, mainly via financial support to UConn and other investments in Connecticut's research and development efforts and infrastructure, something that has become the hallmark of the Malloy administration's economic development strategy.

Despite that uncertainty, Connecticut's bioscience industry continues to build on what it has, observers and industry officials say.

"People are starting to notice that Connecticut is a player in bioscience,'' said David Wurzer, executive vice president and finance chief at Connecticut Innovations Inc., the state's quasi-public technology investment arm.

Gov. Dannel P. Malloy is credited with rebooting the state's bioscience ambitions when he launched his Bioscience CT initiative in 2011, which committed $864 million to: Renovate research facilities at the UConn Health Center in Farmington; create 28,000 square feet of new incubator space to foster business startups; and construct a new ambulatory-care facility and patient tower at John Dempsey Hospital.

A report completed at that time by UConn's Connecticut Center for Economic Analysis said the investment would yield 16,400 jobs and $823 million in new state tax revenue by 2037. It's unclear how much progress the state has made so far; Malloy says the state's investment is meeting expectations, but he warns this is a long-term investment whose benefits won't be maximized for decades.

Malloy's take

He said Connecticut's bioscience standing was hurt by the lack of investment prior to his administration.

"Connecticut was in a good position years ago," Malloy said in an interview with HBJ about the state's bioscience aims and milestones. "It allowed that position to dissipate before I became governor. And much of what we're trying to do is to say, 'Hey, we're still that state that used to rank No. 4 in the country in related fields. We slid to 14th or 16th. We want to be back in the top five.' That's not going to happen overnight."

Other state investments — including bioscience innovation and stem-cell research funds and expansion of UConn's science, technology, engineering and math (STEM)prowess — also support the industry's growth.

Malloy says Connecticut can support and sustain its bioscience ecosystem even as storm clouds gather in the form of the state's fiscal crisis.

Catherine D. Smith, commissioner of the state Department of Economic and Community Development, says fears of the state pulling back on its investment in the industry are overblown. While key parts of the state budget are at risk, much of the state's commitment to the bioscience sector continues to be in the form of state bonding.

Bioscience investment a 'bright spot'

Republican state Sen. Toni Boucher, whose district includes Fairfield County, where German 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 question, there's a concern there.''

Connecticut's investment in bioscience R&D

Much of Connecticut's achievements in bioscience are the result of its generous financial seeding of such ventures. Connecticut presently has three varieties of R&D tax credits, including for bioscience/biotech companies that relocate to the state. New Haven biopharma executive Mary Kay Fenton, co-chair of the Connecticut Business & Industry Association's Bioscience 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 community and can have a major impact.

CT's bioscience advantage

James Baxter, senior vice president for development at Boehringer Ingelheim, said access to R&D credits was a factor in the biopharma'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 buildings also anchor Boehringer more deeply into the state, where it has about 2,700 Connecticut employees whose salaries generate $24.3 million in withheld payroll taxes, 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 laxative, among others.

Not everyone is enamored with Connecticut's bioscience push. State Rep. John Piscopo (R-Thomaston) is critical of Connecticut's efforts to bring Jackson Lab to the state. Piscopo argues the state's bioscience ambitions would have been better served by first investing 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 Jackson 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.

CT's bioscience industry 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 worldwide awareness of the state's bioscience ambitions and also loosened UConn supporters' pursestrings to the foundation.

"We need the scholarships and fellowship support,'' Newton said. "I don't anticipate 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 dollars 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. Arvinas, 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 startups are drawing job interest among Millennials who are "excited and energized,'' Litchman said, at the prospect of either starting their own company or being involved in shaping a company 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 apartment builders, landlords and the communities in which they are built.

Farmington, home to UConn Health, 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 vacancies and high demand among existing living 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 circulated globally. Dozens of Israeli bioscience 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 choosing 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 previously worked at the large drug makers currently or formerly active in the state, along with ex-workers at several of Connecticut's homegrown biopharmas, including Achillion Pharmaceuticals, Rib-X Pharmaceuticals 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 people are well-informed, engaged, voting electorate serving on local community boards.''

See the other articles in our ongoing Building Bioscience series.

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