December 5, 2016

CT's '7 sisters' launched state's bioscience golden age

PHOTO | Steve Laschever
PHOTO | Steve Laschever
Dave Wurzer was among Connecticut's early bioscience pioneers, as CFO for former CuraGen, one of the “7 sister” firms that helped develop the industry in the state. He's now helping the state expand its biosci ecosystem.
PHOTO | Contributed
Connecticut venture capitalist Harry Penner (right) staked some of this state’s earliest bioscience startups. With Penner is Trumbull lawyer Anthony Sabatelli.

Connecticut's bioscience sector today pulses with thousands of scientists and executives at dozens of startup drug developers and maturing biopharmaceutical companies.

But it was barely two decades earlier that a state more known for manufacturing and as the world's insurance capital, became host to a handful of fledgling bioscience firms — seven, to be exact — that managed, through good science, good timing, and generous financial backing from the state, to establish Connecticut as a budding hub of bioscience innovation and entrepreneurism.

Achillion, Alexion, CuraGen, Genaissance, 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. Collectively, 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 entrepreneur 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 sisters,'' as they are loosely known in peer circles, also collectively have left behind, observers say, an invaluable legacy to the state's bioscience industry: They were responsible for recruiting and retaining much of the scientific, administrative and investment talent that exists today in Connecticut.

Their other enduring contribution, according 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 Connecticut continue to echo well after the departure of drug giants Bayer and Bristol-Myers Squibb, both of which over the years recruited hundreds of scientists and biopharma executives to Connecticut, some of whom eventually launched their own startups.

Pfizer Inc., which once had a major research presence on the shoreline, has sharply curtailed its footprint there. Meantime, German drug maker Boehringer Ingelheim continues 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 investment officer at Connecticut Innovations Inc., the state's quasi-public technology promotions and investment arm. "All of those seeds gave rise to a critical mass of bioscience companies that were able to attract scientific talent from around the country.''

'Golden period'

Hartford serial bioentrepreneur Dr. Gualberto 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 testing 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 Genaissance, which raised $60 million in 2000 as one of Connecticut's first bioscience initial public offerings, credits Ruano as "one of the first people in the world to articulate the idea of personalized 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 bioscience 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, founding partner of Baltimore life-sciences venture investor HighCape Partners and a board member of Connecticut United for Research Excellence (CURE), the state's chief lobbying 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 economic 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, especially 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 universities to leverage their research, patents and other intellectual property into business ventures.

In Connecticut, Yale, whose medical and technology professors for years had pursued solo commercialization of their research, quickly seized on the opportunity to coordinate and facilitate those startup efforts — a pivotal event for drawing interest and money to the sector, observers say.

All seven Connecticut bioscience startups can trace their roots directly or indirectly to Yale. In the last 20 years, the university has launched some 60 biotechnology companies that have raised more than $1 billion in professional venture capital, said Jon Soderstrom, managing director of Yale's Office of Cooperative Research. Yale also financed development of Science Park out of a collection 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 success,'' 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 uncomfortable 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-lobby at the time, rode to the rescue.

Lawmakers' approval of legislation allowing startups in bioscience and other industry sectors to convert their operating losses, beginning with the 2000 income year, into tax credits 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, Connecticut approved 72 credit exchanges totaling 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 support 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 flagship research university, UConn, observers say.

Dr. Timothy R. Shannon is a Connecticut 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 bioscience during that time are still active and regularly connect with each other.

That, Shannon says, is where Connecticut derives maximum benefit.

"The legacy of those pioneers in Connecticut 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.

See related story: The 'XX' factor in CT's bioscience ecosystem

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