Growing New Small Businesses
10:34 am
Mon April 4, 2011

Pfizer Layoff A Biotech Opportunity?

Over the next year or so, Pfizer will lay off more than a thousand people in Connecticut. If most of these highly skilled workers leave the state it’s estimated the hit to the local economy could be more than $100 million annually. WNPR’s Harriet Jones reports on the prospects for retaining some of these skills by growing new small businesses.

In a two thousand square foot former restaurant in New London you can catch a glimpse of what a homegrown biotech industry might look like in this part of the state.

"Ok, so in here is what we call the wet lab, it’s where you do your benchwork biology….”

This is Myometrics, built from scratch by two former Pfizer employees, Jim O’Malley and Tom Owen, who were laid off in a previous restructuring in 2007. Myometrics is developing a drug that speeds up bone formation. Jim O’Malley says they hope within a year to have a drug candidate that they can license to another big pharmaceutical company.

“One of the advantages we have, is having come out of Pfizer and big pharma, we know the characteristics of what a drug should look like, so we’re not going to be going back to those companies until we have something that looks like the real thing.”

Increasingly university labs and small biotech start-ups are the places that identify new drug compounds and take the testing up to just before human clinical trials, at which point, big pharmaceutical companies take over. So the business model exists, but that doesn’t mean the process is easy.  Jim O’Malley says the biggest hurdle is getting financing.

“If you go to traditional sources of money such as a regular bank, they’re going to want to know a lot about your cash flow. And unfortunately I can tell you all about my cash flow at this point—it’s all in one direction.”

O’Malley and Owen sank their severance money from Pfizer into the venture, and since then have relied on federal grants and on loans from local agencies such as the Southeastern Connecticut Enterprise Region. It’s also a highly regulated business, and for a one or two person shop, the paperwork can be daunting. O’Malley says he’d like to see a more collaborative approach from state authorities.

“Instead of giving you a form and telling you good luck and away you go, it’s a lot easier if they say, can you come up to our offices and we’ll sit with you and tell you how to fill the form out.”

“There’s nothing wrong at all with ‘what can I do to help you?’”

Tony Sheridan, the President of the Chamber of Commerce of Eastern Connecticut says to a complex and expensive small business like a biotech start-up, the delay caused by state regulation can mean the difference between life and death. He’d like to see an entire change in culture in Hartford.

“When you submit your application to one agency, it should be automatically reviewed by all the appropriate agencies at the same time. Not waiting for one agency to finish and then start with another agency.”

It cost Myometrics about $200,000 just to build and equip its laboratory space, and this points to yet another hurdle for entrepreneurial scientists who may come out in this latest layoff. There are few ready-made places to carry out research. UConn at Avery Point does have an incubator building on campus, but recent efforts to build and equip another biotech incubator in New London have come to nothing. John Markowicz runs SECTER, the Southeastern Connecticut Enterprise Region.

“Those kind of facilities do not come cheap. They cost $400 to $800 per square foot. It’s in fact a significant investment and it’s for the long term.”

He says such a project is not feasible financially on a local level. It would require state investment, or he says, private involvement.

“I might suggest that if in fact there is a long-term plan at Pfizer Groton for them to downscale their workforce then perhaps an arrangement can be made with Pfizer, because they have already made the investment.”

“We are looking for ways to mitigate the impact of these very difficult decisions.”

Toni Hoover is the head of Pfizer’s Groton site. The company does provide generous severance packages and significant retraining opportunities for laid off workers, and she says support for entrepreneurship can be part of that effort.

“We always encourage, in these types of circumstances, our colleagues to tap into their own entrepreneurial spirit.”

She points to an example in Japan. When Pfizer closed its Nagoya research facility in 2007, some of its scientists started a spin-off called RaQualia.

“In that particular instance what Pfizer did was to provide assets—essentially intellectual property—we also provided equipment, as well as leasing them laboratory space. We also bring to bear our legal capabilities from our legal team and our business development organization.”

RaQualia, which started out with venture capital, is now about to undertake an initial public offering. Pfizer continues to be a shareholder in RaQualia. Back in New London, Jim O’Malley says what’s happening at Pfizer now could in fact represent a huge opportunity for Connecticut to grow a new batch of high tech companies headquartered in the state.

"Pfizer did hire the best, and so you’re talking about really good people. This industry would kick off really quickly—we would be like Cambridge if we could get started here."

But O’Malley and others say unless the strategic planning starts soon, that chance may be lost.

For WNPR, I'm Harriet Jones.