Isle biotech firm
lays off 14 workers

Hawaii Biotech, the Aiea-based startup that has emerged as Hawaii's leading biotechnology company, has laid off 14 workers in order to focus resources toward development of two vaccines.

David Watumull, Hawaii Biotech's chief executive, said the company plans to sideline development of anti-inflammatory drugs so it can use cash on hand to develop its vaccines for West Nile and dengue fever.

Although the company has raised money from public grants and private investors to partially finance development of the vaccines, Watumull said the company does not have enough cash to shepherd the drugs fully through the pipeline.

Watumull said the employees terminated included both senior research positions and lower level staff. Before the layoffs, Hawaii Biotech had 60 employees with average salaries of $80,000 and had become one of Hawaii's leading examples of the biotechnology sector's potential to create well-paying jobs.

Although Hawaii Biotech has completed vaccine trials on animals, it has not performed tests on humans. Before it can do so, Watumull said, the company must go through an expensive process of developing the vaccines specifically for human tests. That process alone, which is regulated by the U.S. Food and Drug Administration, can cost millions of dollars, Watumull said.

Actual trials on humans cost still more.

Asked if the layoffs will allow Hawaii Biotech to develop the vaccines, Watumull said: "Partially. We do need some additional capital for me to say, 'Yes.' "

Ann Chung, executive director of the Hawaii Technology Trade Association, said Hawaii Biotech's situation underscores the need for local sources of venture capital for midstage startups. Although Hawaii's Act 221/215 provides tax credits for investors in fledgling tech companies, the program is meant to provide seed capital and not the later-stage financing.

Earlier this year, the Legislature failed to pass a bill that would have helped create funding for later-stage companies such as Hawaii Biotech. Known as the State Private Investment fund, the bill would have offered tax credits as collateral for private investments.

Hawaii Biotech "wouldn't be in this situation had SPIF been available,' Chung said.

Still, he said Hawaii Biotech's situation was not dire.

"This is a normal thing in the life of a tech company; this happens all the time," she said. "They have to react and regroup to the situation that they're in."