SMITHFIELD – The decision by the Alexion Pharmaceuticals to close its manufacturing plant in Rhode Island, with the loss of some 250 jobs, sent shockwaves through the local news media, which was still trying to cope with the decision by Benny’s to close its 31 stores in Rhode Island by the end of 2017.

In Benny’s case, the store closings may have reflected the changing nature of relationships within a fourth-generation family business as much as it was a business decision, something that owner Arnold Bromberg hinted at briefly in an interview with The Providence Journal, but was not followed up on by the reporter.

In addition, what was also somewhat lacking in the reporting was an in-depth economic analysis of what was the actual value of the real estate holdings that the Bromberg family still controls, compared to the value of the stores. The sale of the real estate holdings could prove to very lucrative for the Bromberg family and, depending on what companies purchase them, lead to a new source of jobs creation enterprise in Rhode Island.

With the decision by Alexion to move its headquarters from New Haven, Conn., to Boston, Mass., and to close down its Rhode Island manufacturing facility, what was missing from the local news coverage was the larger context in which the decision had been made:

• The move was part of a global restructuring of a biopharma company that has a current market cap of some $30 billion, with the biggest hit – what Richard Horan, the senior managing director of the Slater Technology Fund, called a technical knockout, a TKO – being taken by New Haven, Conn.

• The historical context of the development of the bio-manufacturing facility, which was built in 1993 with the help of some $30 million in financing by the state of Rhode Island to construct a state-of-the-art lab facility for Alpha-Beta Technology, Inc., a biotech firm with a promising anti-infection drug, Benefactin. However, the drug did not perform well in testing, leading the firm to close its doors in 1999.

• The biomanufacturing facility was then sold to the Collaborative Corporation in 1999. Then, in 2000, the Smithfield facility had been acquired by Dow Chemical, with the intention to have it serve as a contract manufacturing plant for biologics, such as vaccines and other related products. Dow then decided to sell the facility in 2004 after its contract manufacturing ambitions fell through.

• Alexion purchased the facility in 2006 as the biopharma firm geared up for the commercialization of its blood disorder drug, Solaris.

The broader context
Given the history of the biomanufacturing facility in Smithfield, the likelihood that it could be purchased and repurposed by another biopharma firm is high, according to Horan. “That is not to say that it will happen fast,” Horan cautioned.

The loss of 250 jobs that were high-value jobs is significant, Horan said. He speculated that problems identified at the manufacturing facility in Smithfield that led to an investigation in 2016 by the FDA with the need for remedial action may have contributed to the decision to close the facility in Smithfield as part of the corporate restructuring, although he qualified those remarks by saying he had no specific knowledge of the reasons behind that decision.

The more salient point, Horan continued, was that the story of Alexion needed to be seen in a much broader context, something that he thought that the local news media, with its parochial focus, tended to overlook in discussing the biotech industry.

“Alexion is a biopharma company that had joined the ranks of the major leagues in a very short period of time. Companies such as Merck and Pfizer and Bristol Meyers Squibb took almost a century to build their market cap to hundreds of millions of dollars,” Horan said.

Most of Alexion’s growth occurred over the last 10 years, he continued, reaching of market cap of $40 billion as recently as 12 months ago. “The market cap is now about $30 billion,” Horan said.

The announcement of the corporate restructuring, with its 20 percent reduction in Alexion’s workforce, the shutting down of the manufacturing facility in Rhode Island, and the move of the firm’s headquarters to Boston, Horan continued, “It did not have any impact on the stock price. The markets had come to understand that the company was going through a fundamental transformation under a new CEO.”

Lessons for Rhode Island
As Rhode Island moves forward with its plans for the Wexford Innovation Center, Horan said that there could be a larger lesson for Rhode Island from the Alexion decision to relocate from New Haven.

“Alexion had become the shining example of what a biotech industry strategy could mean for a meaningful metropolitan area,” Horan explained. “It had become the centerpiece of a million-square-foot real estate development linked to Yale, with Alexion as the anchor tenant.”

When I think of Providence and the Wexford development, Horan continued, “I think about the way that Alexion had become the pot of gold at the end of the rainbow for New Haven. It’s now just the opposite, because of the consequences of global restructuring of a major biopharma company.”

Alexion said that it would maintain its large research presence in New Haven, retaining some 400 jobs, Horan added. The question remained whether that would be a sustainable enterprise in the future.

The view from New Haven
Mitchell Young, the publisher of Second Wind, a digital online newsletter covering business in New Haven, offered his insights to ConvergenceRI about Alexion’s decision to move its headquarters to Boston.

“Creating new cutting-edge drugs is not rocket science, it’s a lot harder,” Young wrote in an email to ConvergenceRI. “And creating a successful bioscience company from scratch that will have a sustainable and independent future is very difficult. Building out a localized industry of them has proven even harder.”

Young continued: “It has taken a decade or more for some of these companies to fail or partially succeed, by selling off their technology.”

“Many of the scientists or managers do move on to another effort, and if it’s local, we comfort ourselves by calling it an ecosystem and there are some limited successes,” Young explained. “We wrote, for example, about Kevin Rakin in 1994 who was a co-founder of a company called Genaissance in New Haven; the company eventually sold its core to an out-of-state firm.”

Rakin, Young said, had helped to build several Connecticut enterprises and recently started a venture firm, High Cape Partners, which is funding bioscience companies, including a new one in Connecticut.

The connection to Yale and UConn
Young identified that much of the potential for new bioscience success in Connecticut started with research at Yale and, much more recently, at the University of Connecticut [where Jackson Labs has built a $1 billion facility on the medical school campus in Farmington].

“Yale and now UConn have some really great bioscience innovators on the faculty and excellent people in tech transfer,” Young wrote, “but overall the top administrators at Yale could use some real humility and urgency if their goal really is economic development and not just keeping faculty.

In the wake of the Alexion announcement, Young continued, “There has been some public blaming about the ecosystem, and how Connecticut potentially should have located Jackson Laboratories research facility in New Haven and aligned it with Yale and not UConn. If that is the level of sophistication these leaders are on I can guarantee you ecosystem failure.”

Important lessons
One important lesson, Young argued, “Is that you can’t rely on a single field of science and technology at the university level or in economic development. Yale’s leaders might not admit it, but when they turned their back on computer sciences in the early 1990s they made a terrible strategic error. Computer science is a foundation of bioscience today.”

“Neither Yale, New Haven or Connecticut is seen as having much strength in the computer sciences today,” Young said, “and all we hear about are some homilies about teaching girls to code software.”

The exception to the rule
In Connecticut, Young wrote, “Alexion has been the possible exception that has proven the rule: it does more than $3 billion in sales and has a $30 billion market capitalization. It has had a strong organization and corporate culture and was well-focused on its mission.”

Young continued: “Alexion was a great building block for New Haven and the cutbacks in employment and growth will make it harder for recruitment at other firms, spousal employment opportunity is essential in bio-science recruitment. Overall, New Haven is riding a demographic wave – Yale, Quinnipiac University, the University of New Haven, Southern Connecticut University, Fairfield University, Wesleyan, the University of Bridgeport, Sacred Heart, and even UConn are all growing and building out their programs and faculty very impressively. New Haven is and will increasingly be the principal municipal benefactor of those developments.”

Young said he expected that many Alexion employees that choose not to relocate would be absorbed by other bioscience firms – in Connecticut, New York and northern New Jersey.

“I would imagine most that are given the opportunity will relocate to Boston, depending on spousal employment,” he wrote. “The loss of Alexion jobs also comes on the heels of hundreds of bioscience jobs losses in the closing of Bristol Meyers in Wallingford earlier this year.”

In terms of real estate, Young said: New Haven has one of the tightest residential markets in the country, and rent increases are above the national average. New developments continue, and if officials don’t blow it, demographics and the growth of Connecticut’s colleges and universities will keep the party going.”