Investing in biotechnology is a riskier bet these days. The community of life sciences venture capital firms is contracting, despite scientific advances across many fields like genomics, immunology, and diagnostics. Many promising new enterprises fail to produce marketable drugs, and even successful therapies may struggle to gain markets in an environment of health care cost cutting.
That’s exactly why Johnson & Johnson (NYSE: JNJ) chose to expand its programs that nurture very early stage biotechnology and device startups in the Bay area, J&J executives said as they opened the company’s California Innovation Center in Menlo Park, CA, this week.
The new center, one of four planned by the drug giant based in New Brunswick, NJ, will look for promising collaborations with emerging companies. It will also assist academic scientists and entrepreneurs to form companies—not the standard M.O. for big pharmaceutical conglomerates. But J&J says it is stepping in to reinforce the biotechnology ecosystem that used to fatten up many young companies to get them ready for pharma deals.
“There has never been better science in the history of the world—never,” says Diego Miralles, the San Diego-based head of the J&J California Innovation Center. “We need to roll up our sleeves and go further upstream. Otherwise, there’s not enough to sustain the industry.”
The center is intended to operate like a one-stop point of contact for scientists, entrepreneurs, and startup founders looking for help from J&J. The 7,000-square foot center on El Camino Real in Menlo Park is a bike ride away from the Stanford University campus and the venture capital mecca along Sand Hill Road, amid a dense community of entrepreneurs. The staff of 21 includes experts in science, business transactions, and investing who will catalyze interactions between entrepreneurs and J&J’s various divisions. J&J’s venture capital subsidiary, Johnson & Johnson Development Corporation, is part of the team.
The new J&J innovation center already has facilitated a wave of new activity in California, where the New Jersey drug company has other affiliated units.
• Janssen Labs, J&J’s expanding San Diego incubator for life sciences startups, is opening a branch incubator at a facility run by the California Institute for Quantitative Biosciences (QB3) near UCSF’s Mission Bay campus in San Francisco. The 5,000-square foot Janssen Labs @QB3 will accommodate as many as 10 startups, and it has an option to expand.
• J&J company Janssen Biotech is beginning a research collaboration with San Bruno, CA-based Second Genome to study the role of microbes in the digestive tract—the microbiome—on ulcerative colitis. This is the first collaboration launched by Johnson & Johnson Innovation, the new division that has now opened innovation centers in London as well as California, and plans two more in Boston and Shanghai.
• A Bay area scientist, David Kirn, is the first entrepreneur chosen for the newly launched Johnson & Johnson Innovator Program. Kirn, a veteran biotechnology executive and founder of San Francisco-based Jennerex Biotherapeutics, will generate ideas for new ventures and propose a startup company of his own as a J&J investment. The California Innovation Center is looking to award similar contracts to other entrepreneurs on the West Coast.
• J&J’s venture capital arm led a $14 million Series B round for Protagonist Therapeutics, which is based in Menlo Park, CA and Brisbane, Australia. The company is working on oral di-sulfide rich peptide (DRP) compounds in a search for drugs that share the advantages of both small molecules and biologics.
Miralles says J&J’s experience with Janssen Labs in San Diego persuaded the drug giant to become more “enmeshed” with the community of entrepreneurs, and to send more jobs to centers of innovation such as the Bay area. The original Janssen Labs, which shares a building with a major J&J research facility in San Diego, started accepting its startups in early 2012. The idea was to nurture fledgling companies by providing a ready-made infrastructure with labs, equipment, supplies, phones, and administrative services so that entrepreneurs could focus on science. It now hosts 29 companies, giving a start to companies such as San Diego’s Arcturus and Araxes Pharma.
The “no-strings” incubator rents space at market rates, and leaves startups free to make partnerships deals with any company, including J&J units. Under strong demand for space among entrepreneurs, the San Diego incubator expanded to 32,000 square feet. It may get bigger, and may expand to new locations other than San Francisco. Like the San Diego unit, Janssen Labs @QB3 will accept applications from any geographic location. J&J won’t be the first big drug company to welcome startups at Mission Bay. Bayer created an incubator space for them last year.
Miralles says the role model for the new innovation center in Menlo Park is Third Rock Ventures, the Boston and San Francisco-based venture capital firm that specializes in creating startups. Third Rock has launched or supported more than 30 companies, and recently raised $516 million for its latest fund.
The California Innovation Center is a “tech-like building” designed to foster interactions and creative thinking, Miralles says. There are no designated office spaces, so staffers plug in at whatever work station is available. He says the kitchen and communal dining table would be perfect for hosting academics, entrepreneurs, and VC’s at “J&J California Innovation Lunches,” modeled after the community lunches at the venerable Sand Hill Road venture firm Kleiner Perkins Caufield & Byers.
“We want to make sure we add value to the community,” Miralles says. By generally fomenting the development of more startups, J&J can benefit itself and the entire industry, he says. It’s a different approach for a pharmaceutical company founded in 1886.
“Traditionally pharmaceutical companies have been waiting for other people to set up companies that need investment,” Miralles says. In the 20th century, big drug companies were self-contained, “walled-in” entities, he says.
“The 21st century is very interactive,” Miralles says. “We want to have a much more porous organization.”
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