CT's bioscience sector has a new strategic plan that industry boosters say could add 6,000 new jobs over the next decade

HBJ File photo CaroGen CEO Bijan Almassian (right) in his UConn Health incubator lab. CaroGen has made plenty of progress, partly with the help of state investments. Its next hurdle will be raising millions of dollars, no easy feat, especially in a state with few venture capital firms, to advance its chronic hepatitis B drug to clinical trials.

Dawn Hocevar, CEO, BioCT

Dr. Bruce Liang, Dean, UConn School of Medicine

LuAnn Ballesteros, Vice President of External and Government Affairs, Jackson Laboratory

State Rep. Jonathan Steinberg (D-Westport)

State Sen. Tony Hwang (R-Fairfield)

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By Matt Pilon

In his first few years in office, Gov. Dannel P. Malloy sought to make a name for Connecticut in the world bioscience, committing more than $1 billion to recruit faculty, back research, seed startups and build or expand major facilities, mainly at UConn Health's Farmington campus.

Now, Gov. Ned Lamont, with input from industry, higher-ed and state officials, is assessing what might come next.

Budget-deficit pressures and Lamont's pledge to significantly reduce state borrowing likely means another legacy-defining investment may not be in the cards for the bioscience sector.

But that doesn't mean industry stakeholders won't be lobbying for more support. In fact, they are.

Their wish list includes investments and policies aimed at: developing and recruiting companies, C-suite talent and venture capital firms; building additional incubator and lab space; producing and retaining more STEM graduates; and enhancing marketing and branding efforts.

Those priorities came from a broad group of industry backers — UConn, Yale, Jackson Laboratory, the Department of Economic and Community Development, Connecticut Innovations (CI), several venture capital firms, and various companies, like Pfizer and Boehringer Ingelheim — that completed a 50-page strategic plan in December, outlining how the state can help the bioscience sector ramp-up growth and better compete with nearby hotbeds in New York and Massachusetts.

If the state and other stakeholders stick to the plan, the report claims the bioscience sector could add at least 6,000 jobs over the coming decade, an approximately 25 percent increase, depending on how you measure the data.

“Think about that,” said Dawn Hocevar, CEO of industry association BioCT. “If we were really able to grow that, this industry could give Connecticut the growth that it needs, the jobs that it needs, the revenue that it needs.”

With the report now complete, a bioscience working group led by Lamont advisor David Scheer, a serial bioscience entrepreneur whose portfolio includes founding New Haven's Achillion Pharmaceuticals, has started reviewing potential legislation to pitch to the governor.

Needed: VC funding, lab space

One company that helps illustrate Connecticut's bioscience strengths, and some of its shortcomings, is Farmington-based CaroGen Corp.

The Yale spinout, which hopes to begin clinical trials next year for its chronic hepatitis B drug, works out of UConn's state-funded incubator facility and also received a $1 million equity investment from Connecticut Innovations, the state's quasi-public venture capital arm.

“We wouldn't exist if it were not for funding from the state, no way,” CaroGen CEO Bijan Almassian said.

But growing CaroGen to its next stage will be a challenge, he said.

Almassian is trying to raise up to $25 million as part of the startup's first major fundraise, but he's learning about the state's venture-capital limitations.

CI is important, but Almassian said the amounts the agency can invest only gets a company to a certain growth stage. Taking the next step requires private investment. While a couple of VC firms with Connecticut offices are active in the pharmaceutical and life-sciences space, Almassian said there's not enough to go around.

The funding gap for intermediate-level startups isn't a new challenge, said Dr. Bruce Liang, dean of UConn's School of Medicine, who uses a common industry term for it.

“Early capital investment in academic startups and biotechnology companies is critical to ensure success in navigating through the 'valley of death,' “ Liang said.

The new bioscience strategic plan keeps homegrown companies like CaroGen in mind.

For example, it calls for tax incentives tailored to VCs, coupled with a global recruiting campaign to convince venture firms to open local offices.

It also recommends that the state's $200 million Connecticut Bioscience Innovation Fund, which has doled out $55 million so far, focus its remaining investments on job-creating companies rather than research.

Other recommendations include allocating state funds to help finance construction of several new incubator facilities, since UConn Health's Technology Incubation Program (TIP) building in Farmington — which doubled in size under Malloy's bioscience program — is fully occupied. So are several similar facilities around the state.

The report also calls for new space specifically tailored to companies that outgrow their incubator space — something CaroGen hopes to do in 2020. The industry refers to those types of facilities as “graduation” space.

Many chefs, one soup

Officials who worked on the new strategic plan represent numerous and sometimes varied interests, but the recommendations are their best attempt at helping the entire sector, said LuAnn Ballesteros, vice president of external and government affairs at Jackson Laboratory, the Farmington nonprofit medical research center that opened its 183,500-square-foot facility in 2014 with the help of a $291 million state investment.

“While I was there participating and viewing everything through the lens of Jackson Lab, the most important thing for all of us to remember is this is about a statewide ecosystem,” said Ballesteros.

That said, one of Jackson Lab's own priorities is to increase focus on commercializing its scientific innovations, so anything the state could do to incentivize public-private partnerships would be important, said BJ Bormann, the medical research nonprofit's vice president of translational science and network alliances.

“I foresee that within the next 10 years, spin-outs will become much more ordinary for [Jackson Lab] and should be the rule of business going forward,” Bormann said.

The bioscience plan also calls for more collaborations between higher-ed and industry. Exactly what role the state would play in that effort isn't clear, but Lamont recently promised legislation aimed at making it easier to form public-private partnerships. In addition, the report contains a vague warning: “The Governor and General Assembly should refrain from seeing collaboration as a trigger for taxation.”

Colleen Cuffaro, East Coast principal at Canaan Partners, which has invested $175 million in Connecticut-based companies, said the best thing state government can do is have policies that help companies start, stay and thrive here.

“Ultimately the best fuel for bioscience innovation at the local level is a healthy ecosystem of academics, scientists and industry,” Cuffaro said.

Perception, budget challenges

One challenge the industry faces in convincing lawmakers to dedicate scarce resources to bioscience is its mixed record in recent years.

For example, the state clawed back $28 million from Alexion Pharmaceuticals after the rare-disease drugmaker decided in 2017 to relocate its headquarters to Boston.

That move followed major downsizing announcements by Bristol-Myers Squibb in 2015 and Pfizer in 2011. Overall, the sector has actually lost jobs over the past few years, according to BioCT, though there have been some positive recent developments, like Sema4 moving 400 jobs from New York to Stamford and two major IPOs by bioscience companies Arvinas and BioHaven.

While the recent pharma downsizings were largely business decisions having little to do with state government, according to the companies, lawmakers are unlikely to forget how fickle business cycles impact Connecticut's economy.

“We've had some hit-or-miss experiences where we've nurtured some of these [companies] and they ended up going to Boston, and I think there's a lesson to learn from that,” said state Rep. Jonathan Steinberg (D-Westport), who, as co-chair of the legislature's bipartisan, bicameral bioscience caucus, is an industry booster.

Legislators are facing myriad demands from interest groups, so any discussion of bioscience tax incentives will face steep competition.

“I think the biggest issue we have with anything related to incentives is: Can we reasonably expect to find money in the budget this year?” Steinberg said.

His fellow caucus co-chair, Sen. Tony Hwang (R-Fairfield), said he intends to pursue legislation that raises the state-imposed caps on research and development tax credits. He also wants to change the state's capital base tax, which bioscience companies must pay even if they have no income (and for years, many don't).

“It disincentivizes investments,” Hwang said of the tax.

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