JLABS Takes Stock of Its Experiment in Life Sciences Innovation

Xconomy San Diego — 

What began as a kind of business experiment in innovation has acquired a life of its own.

The idea in 2011 was to create a space at what was then Johnson & Johnson’s pharmaceutical research and development facility in San Diego for an “innovation center,” a place where 18 to 20 life sciences startups could incubate, replete with lab space and equipment. J&J would screen applicants and charge them to lease the space, but would not require an ownership stake or impose licensing requirements on the startups. It would be a “no strings attached” deal.

The first JLABS incubator opened here in 2012.

Now, as part of a five-year anniversary celebration taking place in San Diego next week, JLABS is taking stock of an initiative that has expanded to six other sites in four cities, with an eighth incubator scheduled to open in 2018 at the New York Genome Center in Manhattan’s SoHo neighborhood. With more than 700 people registered to attend the October 19 event in San Diego, Melinda Richter, who oversees JLABS for Johnson & Johnson Innovation, said, “We want to talk about the progress we’ve made since the first JLABS incubator opened five years ago.”

In San Diego, the JLABS facility now houses 44 life sciences startups, including nine led by women (more on JLABS diversity below). From this initial experiment, Richter said JLABS went on to create incubators under separate partnerships in San Francisco (with the California Institute for Quantitative Biosciences, or QB3) and Boston (with the University of Massachusetts Medical Device Development Center, or M2D2), “which was another experiment.” (JLABS eventually established two incubators in each region.) From there, Richter said JLABS opened facilities in Houston and Toronto, and “now we are looking at this as a longer-term plan.”

JLABS_San Diego Lab (JLABS photo used with permision)

Inside JLABS San Diego

This proliferation of JLABS sites over the past five years has included a substantial build-out of in-house support programs for life sciences startups that has gone largely unrecognized. So JLABS quantified some of the results in a report released earlier this week:

—From some 1,500 applications, JLABS has admitted 312 startups, which includes 179 current tenants at its seven sites throughout North America. (JLABS estimates that 80 percent of the total admitted are still in business.) In addition to lab space, JLABS said it has hosted 1,260 investor meetings and provided almost 850 networking and educational events, which include technical training, mentoring sessions, and “How to” workshops.

—Of the startups admitted, roughly 30 percent joined with less than $1 million in funding; about 45 percent entered with just one or two employees. In the ensuing years, JLABS estimates that its startups have collectively raised some $9.4 billion through financings and strategic relationships. (This number includes IPOs and buyouts as well.)

—As a testament to its “no strings attached” policy, JLABS reports that its startups have executed deals with at least a dozen outside venture funds, as well as with Merck, Novartis, Bayer, Bristol-Myers Squibb, and other life sciences giants. Having a front-row seat also has its perquisites, though, as 71 startups have signed deals (sometimes multiple deals) with the Johnson & Johnson family of companies. (Seven JLABS resident companies have collaborated with each other.)

—Five JLABS startups have gone on to initial public offerings: Audentes Therapeutics (NASDAQ: BOLD) (out of the South San Francisco site) raised $75 million and SillaJen (San Francisco at QB3) raised about $135 million in its IPO in South Korea. Three IPOs came out of JLABS San Diego: Cidara Therapeutics (NASDAQ: CDTX) raised $77 million; Sienna Biopharmaceuticals (NASDAQ: SNNA) raised $65 million; and Mirati Therapeutics (NASDAQ: MRTX) raised almost $60 million through a restructuring.

—Another eight JLABS companies have been acquired, including Cambridge, MA-based Padlock Therapeutics (acquired by Bristol-Myers Squibb for as much as $600 million), Silicon Biosystems (acquired by Italy’s Menarini Group), and Tem Systems (acquired by Instrumentation Laboratory).

Richter, who joined Johnson & Johnson Innovation after initially managing JLABS as an outside contractor, said JLABS “has taken a very tech-oriented approach” to its operations. “We don’t wait for a big panacea solution. You take a step and see how it goes, experiment and see how it goes. For us, it’s just a constant journey of acting, learning, iterating.”

As an example, Richter said JLABS has created a series of QuickFire Challenge competitions as a kind of crowd-sourcing approach for identifying potential technologies and solutions for a variety of healthcare issues. The company has launched 22 QuickFire Challenges so far, including one that offers as much as $100,000 in grants and one year of free JLABS residence to teams that submit the best ideas, technologies, or solutions for using artificial intelligence to advance drug discovery.

One of the stats that Richter said she is most proud of is that 23 percent of JLABS companies are led by a female CEO, and 18 percent are led by under-represented ethnic minorities. “We put a focus on that, it’s something we support,” Richter said.

Gender diversity has been a hot topic in the industry in recent years, and the focus on women at JLABS “is absolutely a step in the right direction,” said Karl Simpson of LiftStream, a life sciences executive recruiting and consulting firm that has looked at gender diversity in the United States and Europe. Simpson estimates that somewhere between 7 and 9 percent of life sciences CEOs are women, a disparity he attributes chiefly to corporate culture and an accumulation of other factors.

For the life sciences companies that start at JLABS, Simpson said, the challenge is whether those higher percentages of top female executives carry through as startups mature and grow into bigger corporate organizations. “Raising capital as a female CEO is very difficult because men dominate the venture capital industry,” Simpson said. “Boards also tend to be male-dominated. So the question tends to be whether they can go the distance.”

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