Elm City attracts biotech startup

A new Elm City-based biotechnology company with potentially groundbreaking technology could help revitalize the city’s economy — provided it can collect sufficient investment funds for its expansion.

Artificial Cell Technologies Inc., a company specializing in multilayer film that was founded last February, is still acclimating itself to its Science Park location, said Laura Malone, who founded the company along with CEO Tom Malone, her husband. The company is looking to use its technology to create artificial virus vaccines and red blood cells, and it hopes to raise $2 million and collaborate with Yale to do so.

Malone said proximity to Yale and the University of Connecticut was a determining factor for ACT in its decision to open in New Haven. Jim Boyle, associate director of the Yale Office of Cooperative Research, said in an e-mail that he is glad ACT chose to settle in the Elm City, and hopes the University and ACT will develop a close relationship.

“Yale considers it a real coup that we were able to help bring ACT to New Haven,” Boyle said. “We see this technology as being synergistic with Yale research, particularly within Biomedical Engineering.”

Much of the company’s future potential and growth will depend on its ability to attract investors, with the goal in mind of raising $2 million in the near future, Malone said. So far, an investor has pledged $500,000, and Connecticut Innovations, a quasi-public group that concentrates on emerging technology companies in the state, may pledge $500,000 as well, which would give other investors confidence in the company, Malone said.

“If Connecticut Investment does decide to invest, it will be a very important contribution to our company’s ability to survive and grow,” she said.

ACT currently employs 10 people, including five on short-term contracts. Malone said she hopes to double the workforce provided that economic and research factors are favorable to the company, but she said many investors are unwilling to pledge money because of the uncertainty and length of time before most starting biotechnology companies become profitable.

“What is clear is there is a gap in funding for companies at our stage,” she said. “Biotech is a unique animal in its funding requirements, [so] investing in [the industry] is a very risky proposition.”

Bill Kelly, a communications officer at CURE, said investors have become more reserved in the last few years due to increased concerns regarding the safety of drugs on the commercial market.

“In general the kind of people who specialize in investing in bioscience realize they will often have to wait for a return, [but] it has been more difficult than it was seven or eight years ago,” he said. “It used to be people were willing to advance pretty large sums and see what happens, but now they are more penny-wise and they want to see a payback sooner than they used.”

CURE is an education and business support network organization for bioscience in Connecticut.

Malone said she and her husband decided to move to Connecticut from Maryland to start the company because of the state’s proximity to biotechnology centers and its tax incentives to new companies.

“We wanted access to Boston but not the high expense of being in Boston, so we thought Connecticut and New Haven in particular offered some real advantages,” she said.

Kelly said he thinks Connecticut is a very attractive state for biotechnology firms to settle in because of its access to capital, the general environment and state tax incentives. He said that while many states give tax incentives to emerging companies, Connecticut uses a system where each dollar of tax credit can be exchanged for 65 cents of direct aid if the company is not profitable.

“A lot of states give tax credits, but that does not do most biotechnology companies much good as they don’t make any money for a while,” Kelly said.

Yet Kelly said he thinks the state should do more to help companies at the seed stage in light of their funding difficulties, as it will benefit the state’s economy in the long run.

“There has been a little less seed money investment in Connecticut than we would like to see,” he said. “Suppose you invest in a business and they bring people to Connecticut. … Even if it does not work, it is profitable to the state, … as it attracts skilled workers.”

But David Treadwell, a spokesperson for the Connecticut Department of Economic and Community Development, said the department does not plan any changes to its current policy.

“We will not be on the forefront of this issue,” he said.

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