A Johnson & Johnson executive who had been instrumental in planning the company’s innovation centers told an audience of curious, but somewhat skeptical researchers, entrepreneurs and graduate students at the Memorial Sloan Kettering Cancer Center in New York that the ICs – J&J’s most ambitious foray into cross-business innovation – are a one-stop shop for the scouting, funding, and nurturing of early-stage life science ideas.

Suzanne Cross, until recently VP, business development in J&J Corporate Development, conceded in the talk on March 12 that in the race to access the latest in life science assets and technologies, J&J was “late to the party.” But she succinctly described the purpose and operating model of the ICs as being different from J&J’s big pharma peers, albeit with the same ultimate goal: licensing, acquiring or otherwise securing early-stage inventions.

She announced that the London IC had opened that day, with Boston and San Francisco to follow in April, and Shanghai perhaps by year’s end. She also said that the head of the Boston IC had been named: Robert Urban, former head of MIT’s Koch Institute for Integrative Cancer Research. Urban started at J&J in November 2012. J&J had earlier announced that executives Patrick Verheyen would lead the London center and Diego Miralles the California center Also see "J&J’s New Innovation Centers Test Immersion Theory Of Access" - In Vivo, 22 October, 2012.. The head of the Shanghai IC has yet to be named. Cross has just moved to the post of VP, business development, Skincare at J&J.

A New Face For Prospective Partners?

She emphasized that the cross-sector framework wherein each IC was staffed by representatives across J&J’s businesses – scientists, lawyers, financial people, business development staff, etc. – would simplify the way the diversified health care company interfaced with biomedical researchers and entrepreneurs. She spoke of J&J’s first cross-sector innovation attempt as being critical to “looking at holistic health care solutions because sometimes just a pill is not enough anymore.” The ICs are J&J’s solution for linking with the outside world in ways that don’t squash innovation, but allow it air to breathe.

“Has anyone here done, or tried to do, a deal with J&J? Was it easy?” she asked. About half a dozen hands went up, and a few voices murmured “No.” Cross conceded that she’d been working at J&J for over 20 years, and it was not easy to find the right person to engage across more than 250 operating companies. “The innovation centers,” she said, will make it easier to connect with the right people for early stage innovation. We’ve made the filtering process – the governance – as clean as possible for faster decision making” she said.

In a sense, the IC framework complements J&J’s corporate rebranding exercise in June 2011 where it brought its core operating units under the Janssen umbrella. The purpose was to present an integrated face to large institutional customers such as hospitals and MCOs who had expressed frustration when interfacing with the company. The ICs likewise present an integrated face to academic researchers, biotech entrepreneurs, and others in the early-stage life science world seeking the company’s funding and support Also see "J&J’s Zytiga –The Anatomy Of A Cancer Launch" - In Vivo, 30 November, 2011..

The ICs are now the primary point of contact at J&J for early-stage entrepreneurs. Many in the audience at MSKCC were accustomed to dealing with the JJDC, the health care giant’s 40-year-old venture capital subsidiary for investing in medical start-ups across its core business areas. However, although J&J is aggressively hiring into JJDC, going forward it will be embedded in the ICs, with JJDC investors co-located in each hub.

In fact, according to Patrick Verheyen, most of J&J’s existing investment funds (e.g, COSAT, RedScript Ventures, the sidecar investments with established VC firms, the investment along with GlaxoSmithKline PLC in the Index Venture Fund VI) and future venture funds will be integrated into the ICs Also see "Backing New Index Fund, GSK, J&J Buy Into Asset-Centric Vision Of Biotech Future" - Pink Sheet, 26 March, 2012..

J&J has made several attempts at accessing and nurturing early stage innovation. Cross mentioned the Office of External Innovation, which worked inside J&J, and the Corporate Office of Science and Technology (COSAT). “Whatever we did wasn’t big enough to get significant traction. We’re not getting there fast enough” she said.

A Fluid Operating Model

The ICs will do any kind of deals, no limits, from grants to equity investments. The equity investments could be separate, individual commitments, or at other times done through a fund. Deal terms will range from $50,000 grants to $50 million co-development deals. With regard to pharmaceuticals, it will look for early-stage assets in cardiovascular, metabolic, immune and autoimmune, infectious disease, neuroscience, vaccines, and hematological cancers. “We’ll be hunting for platform technologies, too,” Cross added.

The remit of the pharmaceuticals group is early stage assets, which Cross defined as anything up to proof-of-concept. But the emphasis is on flexibility. The ICs will provide a battery of services to start-ups in addition to funding and technical support. Cross noted that start-ups are typically in lean mode, unable to divert capital to hiring regulatory or reimbursement experts. “We found a way to provide advice and counsel,” she said “where JJDC people can reach in and provide consulting about a clinical trial design or reimbursement strategy.”

Several in the audience wondered whether the legal teams will be shared across the ICs to assure consistency, or whether a team will be dedicated to a particular IC. Cross said that there will be a team in each IC, but then there will be cross-pollination across all the centers – so they can share standards, deal templates, and the like. “At least, that’s how it will work in North America. One of our biggest challenges will be understanding how deals get done in emerging markets. Asia Pacific has a lot of work to do as far as how do you do start-ups in emerging markets?”

A slight change to the IC model that was unveiled late in 2012 is the integration of research infrastructure into the ICs. Verheyen confirmed that the Janssen Labs in San Diego, unveiled in 2011, are indeed part of the California IC. Cross mentioned that 15 start-ups were currently lodged in the modular wet labs in La Jolla. Speaking of these labs, Cross said, “scientists can use them, no strings attached. The aim is to form a vibrant biotech ecosystem. We have no equity in these incubators; there is just a minimal selection process.”

Although La Jolla is currently the only IC that provides lab space to start-ups, Verheyen says that the feature will eventually roll out to the other ICs. “The execution may be different, but the idea is the same – to help translate academic research” he said.

A Double Mission

The ICs are essentially deal-making machines – those were Cross’ words. At times that seemed at variance with the purportedly altruistic mission to reach out to other stakeholders and create a healthier, more robust ecosystem.

In fact, like similar experiments in which other big pharmas reach outside their walls and set up shop in regions where promising, nascent science is happening, the mission of J&J’s ICs is bi-modal Also see "Pfizer Teams With Eight Boston-Area Research Institutions In $100MM Tie-Up" - Pink Sheet, 8 June, 2011.. “It’s not just about capital” said Verheyen, “we want to work with partners to help make the network more efficient.” Or, as Cross put it: “We hope at some point we can come in and swoop up assets.”

The presentation at MSKCC ended on a slightly discordant but also humorous note that suggested the challenges J&J faced in reaching out. Someone in the audience asked how entrepreneurs and scientists apply to participate in an IC. “Do we onboard through the web site? Is it a quick decision yes or no?” Another audience member who had attempted the onboarding process confirmed that there are “lots of forms on the website, but I couldn’t find the names of individuals to contact.” She saw a lot of legalese in the forms, and declared “your old lawyers are here!”

Better Late Than Never, J&J’s Innovation Centers Start Opening For Business

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