Sema4, a biotechnology company that received millions of dollars in state loans to open laboratories in Branford and Stamford — and later went on to serve as a top COVID-testing contractor for the state during the first two years of the pandemic — is shuttering its Connecticut lab operations.
In a conference call with analysts Monday announcing Sema4’s third quarter earnings, Chief Executive Katherine Stueland said the company was eliminating its reproductive health business, cutting 500 jobs and closing its 70,000-square-foot laboratory in Stamford, which it opened less than two years ago.
A company spokesman said about half of the employees who will be impacted are based in Connecticut. Sema4’s primary laboratory will be its facility in Gaithersburg, Md., and the company will still employ about 1,100 after the cuts, a spokesperson said.
The news comes just three months after Sema4 announced plans to exit another line of business — somatic oncology — and close its first Connecticut lab, in Branford. That decision eliminated more than 200 jobs, roughly half of which were located in the state, according to a letter the company filed with the Department of Labor. It also coincided with the resignation of the company’s former CEO Eric Schadt.
Sema4 spokesman Radley Moss said in an emailed statement that Sema4 would be maintaining its headquarters in Stamford. “These changes better align Sema4 to accomplish those goals and allow us to focus on and accelerate other areas of our business that enable us to impact patients in more powerful ways,” the statement read.
Those “other areas” appear to be focused on lines of business the company took on when it acquired fellow genomic testing company GeneDx for more than $600 million this spring, namely pediatric and rare disease sequencing and data analytics.
Stueland, who served as CEO of GeneDx before the acquisition and now leads the combined company, said more competition among reproductive health testing providers raised the cost of offering that type of testing.
“What became clear is that we have an incredible opportunity deep in the areas of distinct strength,” she said.
Once a hot startup
Before going public last year, Sema4 attracted investment and economic support from several state sources, including the Department of Economic and Community Development and quasi-public venture capital outfit Connecticut Innovations.
In 2015, Gov. Dannell Malloy’s DECD agreed to loan $9.5 million to the Icahn School of Medicine at Mount Sinai in New York, where Sema4 was created. The first portion of that loan, $9.5 million, was released in two stages: first, $5 million to build the Branford laboratory, and second, $4.5 million, which was released when Sema4 established its headquarters in Stamford. Sema4 was approved for another $6 million loan in 2018 to support building the Stamford laboratory.
Up to $12.5 million of those loans was forgivable, provided the company maintained certain numbers of Connecticut-based employees: 35 by the end of 2017; a total of 269 by Dec. 31, 2021; and an additional 280 or so before the end of 2025.
The state has forgiven $4.5 million of Sema4’s loans so far. Sema4 still owes $11 million in principal, and it’s currently making interest-only payments on the loans.
According to the state’s agreement with Sema4, if the company fails to maintain those numbers, it owes a penalty of $36,166.37 per job. And if the company relocates operations outside of the state, “the full amount of the financial assistance received, including any forgiveness provided from the State shall become immediately due and payable, plus a one-time penalty charge of 7.5% on the original amount of the financial assistance provided.”
Since August, when Sema4 announced the Branford lab closure, DECD has provided no details about how the state aims to hold the company accountable to the terms of its loan contracts. The second closure, of the Stamford lab, appeared to have come as a surprise to the department.
In an email Monday, DECD Commissioner David Lehman said the “lines of communication” with Sema4 remain open and active. “We are in the process of reviewing internally how today’s announcement impacts the financial contract between DECD and the company,” Lehman said.
Connecticut Innovations, the state’s quasi-public venture capital arm, invested a total of roughly $2 million in Sema4 over two startup funding rounds in 2019 and 2020, before the company went public in the summer of 2021.
On Monday, a spokeswoman for C.I. said the firm remains a “de minimis” investor in Sema4.
“We never want to see Connecticut lose jobs, but it is a challenging time in the public markets and Sema4 is making changes to become more profitable, which we understand. We do know our portfolio companies are actively looking to hire, and we hope the ecosystem can absorb some of this talent,” spokeswoman Lauren Camody wrote in an email.
Carmody added: “Our mission operates with a double bottom line — creating jobs and generating returns. A home run for us is when a company delivers on both.”
Political controversy
But Sema4’s highest-profile and perhaps most controversial investor was Oak HC/FT, the venture capital firm that counts Connecticut first lady Annie Lamont as a partner.
Oak HC/FT invested in Sema4 twice — first in August of 2019, after the Malloy administration awarded the company two start-up loans, and a second time, in July 2020, two months after the Lamont administration signed a $17.2 million contract with Sema4 to do COVID testing. Later that year, the state awarded Sema4 a second testing contract, worth an additional $8.4 million.
When Sema4 signed its first contract with the state to conduct COVID testing, a lawyer with the governor’s office told state ethics officials in an email that the couple wished to donate “any benefit that they may derive from the contract” to charity.
In a statement provided to the Mirror late last year, Annie Lamont said she and the governor “had no involvement with the decision to enter into a contract with Sema4 or the terms of its contract with the State of Connecticut.” She added that she’d recused herself from any decisions related to Oak HC/FT’s investment in Sema4.
COVID-19 contracts buoyed Sema4’s 2020 testing volume by 131%, and the company continued providing COVID testing services to the state through 2021 before pulling back earlier this year. In a statement late last year, a spokesman described COVID testing as “an ancillary, non-core part of our business.”
In Monday’s quarterly report, Sema4 recorded $0.0 in revenue from COVID testing.