Venture capital firms have long nurtured biotechnology startups that make use of discoveries from non-profit research centers—but the roster of such VC firms has been shrinking. To fill the gap in that financial ecosystem, both research institutions and pharmaceutical companies have been trying out new roles—and meeting each other in the middle.
The Scripps Research Institute in La Jolla, CA, has just unveiled an unusual new standalone drug discovery company it has created: Scripps Advance, which has already founded one startup.
Scripps Advance was also designed as a vehicle to support collaborations with pharmaceutical companies looking for promising early stage projects. It has signed its first deal with the Johnson & Johnson Innovation Center in California—a Menlo Park, CA-based branch of the international scouting initiative J&J created to keep its drug pipeline filled.
“Pharma is investing earlier in product development cycles,” says Scott Forrest, vice president of business development at Scripps. “They don’t stand by while an ecosystem dries up.”
Under the collaboration with the J&J unit, the new Scripps initiative will receive upfront funding (the amounts aren’t being disclosed). The J&J organization will also earmark further money to move a selected number of lab discoveries closer to commercialization, Forrest says.
In addition to funding, J&J’s Innovation Center will also provide guidance to lab scientists—possibly even some specific work plans designed to clear up uncertainties and risks that would make a big drug company hesitate to support or license new technology, says Thorsten Melcher, senior director of new ventures and partnerships at the Innovation Center in Menlo Park (pictured above).
The J&J center is a communications and dealmaking hub that can tap the interests of other Johnson & Johnson units, such as its R&D organization and its venture capital subsidiary, Johnson & Johnson Development Corporation, Melcher says. It can arrange for R&D collaborations, mentoring relationships, equity financing deals, and the formation of startups. The California Innovation Center has already formed relationships with other academic institutions in the state, including UC San Francisco and Stanford University.
“New company formation is down, so we feel we need to be more active in the earlier stages,” Melcher says.
The creation of Scripps Advance marks a turning point in Scripps’ method of interacting with pharmaceutical company partners, Forrest says. In the past, Scripps had formed five-year “first rights” collaborations with a single drug company at a time, such as Pfizer and Novartis. That company gained the right to license any technology at the institute, in exchange for financial support of about $100 million to $125 million, Forrest says.
But it was left almost to chance whether the academic lab projects matched the drug company’s interests, Forrest says. The Scripps Research Institute was free to partner up with other pharmaceutical companies on technology that the “first rights” partner had turned down. But once that happened, outside companies could get the impression that the project was “subpar,” he says. It was a form of what the venture investing community sometimes calls “signaling risk.”
“Not everything got snapped up,” Forrest says.
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