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October 22, 2018

CT's latest biopharma shakeup creates opportunities, casts uncertainty over industry's future

HBJ Photo | Steve Laschever Former high-ranking Alexion employees formed a new startup, Rallybio, as the drugmaker shook up its management and moved its headquarters to Boston. Rallybio's co-founders have since hired four more former Alexion colleagues. In the photo from Oct. 2018, Rallybio's team stands in the company's lab space at UConn Health's incubator facility.
HBJ Photo | Steve Laschever Rallybio’s co-founders (from right to left) are: Martin Mackay, Jeffrey Fryer and Dr. Stephen Uden.
David Wurzer, Chief Investment Officer, Connecticut Innovations
Susan Froshauer, Entrepreneur in Residence, Yale
Dawn Hocevar, President & CEO, BioCT

Connecticut is going through its latest wave of pharmaceutical industry churn, with at least several hundred workers laid off or otherwise displaced at major employers.

Drugmaker Alexion Pharmaceuticals Inc. this summer completed the relocation of its New Haven headquarters to Boston, cutting its Connecticut presence roughly in half. Meanwhile, Bristol-Myers Squibb is in the final stages of shuttering its Wallingford research and development facility, which three years ago had 900 employees. In addition, Pfizer laid off 100 employees at its Groton campus this year as it exited its neuroscience business.

Connecticut has been through several biopharma downsizing waves this century, but it may not be all doom and gloom, according to Dr. Stephen Uden, who departed Alexion late last year as head of research.

In his travels, Uden, who has worked around the globe for major big pharma companies including Wyeth and Pfizer, said he regularly runs into former colleagues, and they all hold something in common — they're smart and often land on their feet.

The challenge for Connecticut, which has invested hundreds of millions of dollars in the last decade to build up an industry heavily courted by other major U.S. cities, is making sure those workers stay here.

“It's easy to bemoan … they're losing all this talent … ,” Uden said. “ … But maybe it's actually a good thing because it's fostering the environment in which innovation can occur.”

Uden knows something about innovation.

Since he left Alexion he co-founded a new bioscience startup in Farmington, Rallybio, which has already raised $37 million in its quest to identify drug targets that will treat ultra-rare, devastating diseases.

Rallybio's seven-member team, which is operating out of UConn Health's Technology Incubation Program facility, includes all former Alexion employees.

It's the type of venture Department of Economic and Community Development Commissioner Catherine Smith would like to see more of in this state.

She said it's hard to say for sure how many of the recently displaced scientists and other bioscience employees will land jobs in Connecticut, but she's optimistic it's a lot.

“I think the majority will find work here,” Smith said. “I can't prove that to you, it's a hard thing to measure.”

Smith pointed to a number of positives that help offset the recent industry disruption, including state-subsidized hiring at Jackson Laboratory in Farmington and Sema4 in Branford and Stamford, and New Haven-based Arvinas's recent initial public offering.

David Wurzer, chief investment officer of Connecticut Innovations, the state's quasi-public venture arm, noted that CI made $15.4 million in equity investments in bioscience companies last year.

Wurzer shares Smith's overall optimism that the state can retain many recently displaced biopharma workers.

“Our capacity to absorb a good piece of that wave does exist,” Wurzer said.

However, he added, drug discovery takes years, so Connecticut's investments will take time to bear more fruit.

Trending smaller

The number of bioscience jobs in the state declined about 17 percent between 2001 and 2016, the Connecticut Mirror reported last year, citing industry data compiled on its behalf. However, at the same time, the number of bioscience firms is growing, which could signify what industry experts say is a new reality in the industry — large companies that used to do more of their R&D in-house are now outsourcing drug discovery to smaller, nimble companies.

Is the state, as longtime Connecticut bioscience entrepreneur and booster Susan Froshauer puts it, sufficiently “sticky” to keep those displaced scientists here?

Like Smith, she's also optimistic. While the recent churn has been a setback, Froshauer sees it as “part of the normal flow” of the industry, and not “some horrible thing happening locally in our ecosystem.”

There's been state investment, more networking activities for scientists, and collaboration among schools and companies, Froshauer said, all of which she believes is helping build the industry here to a “critical mass.”

Dawn Hocevar, who last year succeeded Froshauer as head of the industry association BioCT (formerly CURE), said that both her association's incubator in eastern Connecticut and UConn's incubator are close to capacity (with approximately 60 startups between them). She also said many scientists here want to remain in the state if they're able to, and that there's plenty of interest from outside companies sniffing around Connecticut.

“We get a call every week from a company wanting to come to Connecticut,” Hocevar said.

She noted that industry and government officials are working on a new bioscience strategy for Connecticut, as ordered by a recent state law. She's hopeful it could lead to more incubators and a sharper focus on building the industry here.

One company's loss, another's gain

Some recently displaced scientists have found work in a much different environment: a startup.

Though it may still be an uncommon path, the state's recent investments in incubator lab space aim to make it easier and more accessible for former big pharma employees to start their own company.

Out of the recent downsizing wave, Rallybio may be the most striking success story.

Besides Uden, 60, its co-founders include 62-year-old Martin Mackay, Alexion's former executive vice president and global head of research and development, and Jeffrey Fryer, 49, Alexion's former chief tax officer.

Besides its Alexion pedigree, Rallybio stands out in another way: It raised $37 million just four months after its founding despite not having any intellectual property or a drug pipeline.

Its plan is to use that funding to acquire and develop compounds, molecules and other intellectual property into drugs and commercialize them.

More than anything, Rallybio's early success is about the experience of its co-founders, said Wurzer of CI, which participated in the investment round in April.

“It was a deal we felt we needed to be in,” he said.

All told, Mackay, Uden and Fryer have worked on a few dozen drugs that have made it to market at companies like Alexion, AstraZeneca, Pfizer and Wyeth.

“We've done this and we're going to do it again,” said Mackay (a Scottish name pronounced Mah-kye), who earned more than $8 million in salary, stock and other benefits last year as one of Alexion's top executives.

Indeed, all three co-founders have been successful. None has to work, but they said they felt driven to develop more drugs. Mackay and Uden even coaxed Fryer out of retirement over lunch in New Haven to be Rallybio's financial leader. Fryer said he went home after that meeting and worked on the startup's business plan over an entire weekend.

The three men could have launched Rallybio anywhere, but Connecticut seemed like as good a place as any, they said.

It has quality schools, is a good place to raise a family, has lots of academic research to draw from, and while it's close in proximity to the biotech hub of Cambridge, Mass., it's less expensive and dense.

“It's a really good place to live and it's a really good place to discover medicines,” Mackay said.

Froshauer, who is currently an entrepreneur in residence at Yale, said Rallybio's formation may speak to the health of Connecticut's industry.

Having a team of senior scientists come out of a single company and form their own venture is a more common occurrence in major biotech hubs, like Boston or San Francisco, she said.

There are other spinoff examples in Connecticut as well.

BioPharmaWorks, founded four years ago and housed in BioCT's Innovation Commons incubator in Groton, is comprised of nine scientists who all came out of Pfizer in recent years, said Robert Volkmann, chief scientific officer, who worked at Pfizer for 35 years, until 2009.

He said Pfizer's downsizing since 2011 has been beneficial to him.

“Everyone in my organization has graduated from Pfizer,” Volkmann said. “Everyone has various feelings about that, but most of us have just moved on.”

Founded four years ago, BioPharmaWorks does drug research and discovery.

The company had an offer to locate in Rhode Island, but Volkmann, who rides his bicycle to work, said he and his team simply value their Connecticut lifestyle too much. However, he knows that the startup environment isn't for everyone. Scientists who are earlier in their careers or have families might seek out the perceived security of a big employer.

Compared to some, Volkmann has a more pessimistic view of the bioscience industry in Connecticut and beyond.

He doesn't think the industry is going to grow a lot of jobs here, and says big companies that have left are unlikely to return. Big pharma and other bioscience companies can also tap foreign scientists in other countries, like India, to do contract research for much cheaper, he added.

Volkmann, who gives talks at area colleges, worries about what those trends mean for the next generation of scientists. Students have asked him what they can do in their careers to achieve what he has in his.

“It's just not clear,” Volkmann said. “The whole thing has changed.”

Pfizer and Alexion both shared comments for this story.

Pfizer spokeswoman Samantha Reardon said that when the company downsizes, it offers job-placement assistance to affected workers, as well as a retraining allowance of up to $5,000. She also noted that despite the 100 layoffs this year, Pfizer has added back those jobs plus another 50 in other scientific areas in Groton.

Alexion spokeswoman Megan Goulart said her company offers displaced workers a similar service.

“We recognize that these changes are difficult for people and we're committed to supporting them during the transition,” she said.

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