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Johnson & Johnson: Translation in Asia

publication date: Nov 6, 2014
 | 
author/source: Erin McCallister, Senior Editor, BioCentury

Editor's note: Last week, Johnson & Johnson announced the opening of an Asia Pacific Innovation Center in Shanghai. The center is the company's fourth such facility around the globe, formed to increase J&J's presence in early innovation by working with partners. BioCentury talked to J&J about its program and how the Shanghai center will differ from the other three (see article). It also found out that J&J has already signed six deals with Asia Pacific partners, four of them in China. We present the entire article here with BioCentury's gracious permission.


Johnson & Johnson: Translation in Asia

By Erin McCallister, Senior Editor, BioCentury


The low concentration of entrepreneurs and venture money in the Asia-Pacific region means Johnson & Johnson's newest innovation center will initially go about making early stage deals and investments differently than its counterparts in Europe and North America do. Specifically, the new center expects to do more translation of academic work while it helps build a network of entrepreneurs across the region.

On Oct. 28, J&J announced the official opening of its Asia Pacific Innovation Center with headquarters in Shanghai and satellite offices in Japan, Australia and Singapore. The center also unveiled its first six deals - two in Australia and four in China. Five are with academic institutions, and one is with an incubator.

The center is the fourth and final in an initiative that began in 2012 to increase the number of early stage deals J&J does, as well as the speed and flexibility with which it does them. Each center brings under one roof the scientific, legal and finance expertise necessary to close deals quickly while also working closely with the partners until projects reach proof of concept.

The first center opened in London in March 2013, followed by California and Boston centers in June 2013. Since then, J&J has disclosed 66 of the 100 or so deals that all four of the centers have completed. Looking at all deal types, including licenses, R&D collaborations, grants and equity investments, the lion's share are with biotechs. Nearly all include at least one asset, technology or collaboration that would support the pharma division.

"We are looking for transformative products that make a real difference to patients globally. We aren't looking at it differently whether it's sourced from Silicon Valley or Boston. It might require us to roll up our sleeves a bit more in China and the Asia-Pacific region to help the teams and make them successful. But our hurdles for innovation are the same," said Patrick Verheyen, head of the London Innovation Center and the architect of the Asia Pacific Innovation Center.

The new center is led by Dong Wu, formerly VP of R&D for J&J's consumer health business. That background will help round out the Innovation Center leadership team, which has so far been heavier in pharma and device experience.

The Asia-Pacific team, in turn, will benefit from experience gained during the other centers' head start, especially lessons learned about interacting with and supporting local collaborators in real time.

The three satellite offices, located in what J&J considers to be the region's largest innovation hot spots, will allow the pharma to work closely with the research communities across the large and diverse geographic area the center will be responsible for - China, Japan, Australia and everywhere in between. With people on the ground, J&J can work closely with local researchers to identify the most promising programs and bring them to POC.

Mixing it up

The five academic partnerships announced by the new center are very early stage research collaborations, only one of which focuses on specific molecules or product candidates.

That's consistent with the track record of the other Innovation Centers, which have done more R&D collaborations than any other deal type to date, including 16 with academic institutions and 13 with biotechs.

In Boston and London, where the centers have done 17 and 22 deals, respectively, R&D collaborations make up over half of the deals. However, equity investments in start-ups also make up about a quarter of those centers' deal flow to date. About half of the California center's 21 deals also are R&D collaborations, but the center has also done a large number of incubator and entrepreneur grants.

"You can expect to see a wide variety of deals and deal types out of the Asia Pacific Innovation Center, similar to what the other innovation centers have done. The flexibility of the deal type/structure is one of the hallmarks of the model," Wu told BioCentury.

However, Wu noted his center's work in the near term "will be much more about working towards academic translation of results into commercial products vs. in the U.S. or Europe where there are many more entrepreneurs that already translate those."

The two Australia deals announced last week include an R&D collaboration with the James Cook University to explore whether proteins produced by hookworms could regulate the immune response in Crohn's disease and ulcerative colitis. The other is an extension of a February 2012 collaboration with the University of Queensland to study a peptide derived from spider venom that has the ability to block a single ion channel or enzyme with the potential to block pain.

The China deals include two R&D collaborations. The first is with Peking University to identify agonists and antagonists of G protein-coupled receptors (GPCRs) for CNS disorders; and the other is with Zhejiang University to determine the role of human lactate G protein-coupled receptor 81 in the regulation of metabolism and metabolic syndrome.

A third China deal is focused on specific product candidates, but it is still an R&D collaboration rather than a license. The deal with China Pharmaceutical University includes an R&D collaboration around a novel antibody-drug conjugate (ADC) for solid tumors, collaborations to explore new "functional foods" for improved health, and the development of new topical and nasal consumer health products for pain, respiratory and dermatology indications.

Wu noted the Australia deals reflect that country's preference for naturally derived products among both researchers and consumers, while the China deals reflect the research strengths of the individual Chinese institutions, as well as J&J's focus on diseases that are prevalent or unique to that country.

However, Wu's team is still getting the lay of the land, and the center isn't narrowing its focus to any one scientific field in a given country. "We think innovation happens everywhere. Our aim is to find the best science wherever it may be in the region. Currently, we are working extensively on landscaping the science areas to find particular strengths of each location. This may guide us on sourcing more focused collaborations in particular areas," he said.

While these earlier stage deals could mean a longer timeline to POC, Wu said that won't be the case for all of the new center's deals.

"We are also working on consumer deals and medical devices and diagnostics, which have a shorter time to proof of concept," Wu said.

Consumer culture

Indeed, Wu's background in consumer health complements the strengths of his fellow center heads and should lead to more consumer deals across the Innovation Centers.

To date, deals with a consumer health component make up the smallest proportion of the deals the centers have done at just 8 (12%), compared to 60 (91%) of the collaborations with a pharmaceutical component. The totals exceed 100% because several of the deals have components that fit in two or all three of the pharma's business divisions.

"I come in as one last piece in the jigsaw puzzle as the former consumer head of R&D. We have four leaders of the Innovation Centers, each with our own expertise in a particular area," Wu said.

Wu joined J&J in 2007 as senior director and head of emerging markets R&D with a focus on personal care.

Previously, he held various positions across China, Japan, the U.S. and U.K. at consumer products company Unilever N.V. He was part of the team that founded the Unilever Regional Innovation Center in Shanghai, which opened after his departure, in September 2009.

Ken Drazan, head of J&J's California Innovation Center, has a background in investing and medical devices. He is a transplant surgeon by training and joined J&J as the head of the California center in March. Previously, he co-founded Bertram Capital Management in 2006 where he focused on middle-market equity investments in business services, consumer products and healthcare services. The healthcare portfolio at Bertram Capital included medtech companies like diabetes device company Sanare LLC. He was also the founder and CEO of now-defunct cardiovascular company Arginox Pharmaceuticals Inc.

Verheyen was previously VP of new ventures at J&J and before that headed the pharma's M&A team.

Robert Urban, head of the Boston Innovation Center, was formerly executive director of the Koch Institute for Integrative Research at the Massacusetts Institute of Technology.  

Urban and Verheyen said the Innovation Center leaders frequently communicate about potential opportunities to get feedback on a program's value.

"Having another set of capabilities in Asia to help us get things done will be another component in the tool kit, and we're thrilled about what that might translate to for us," Urban said.

Wu added, "One of the reasons I sit here is to bring in more consumer-relevant assets in this region."

Consumer health is a large and growing market in Asia-Pacific countries.

In its 2012 Outlook for the Retail and Consumer Products Sector in Asia, PricewaterhouseCoopers forecast that by 2015, the health/functional foods market alone would be valued at $71 billion in China, up from $21 billion in 2010. The report did not give an estimate of growth for the entire Asia-Pacific region.

Additionally, Wu said the governments of Singapore and other countries in the region have been steadily investing more in consumer health.

"In Asia-Pacific, we are the largest population in the world and there are a lot of [upward] consumer trends in the region that are not just personal healthcare but also the OTC market, and the consumer daily market," Wu said. The consumer daily market includes products like shampoo and soap.

Verheyen added, "In the region, people are looking at innovation on the consumer side as how to get products to patients more quickly at lower price points. [Wu's] expertise working in that type of environment will help us to recognize that type of innovation better and to help us realize it."

Boots on the ground

The benefits will go both ways, as the Asia-Pacific center expects to learn from the other centers' first year and a half of operations. One of the lessons from the U.K. center was the need to have local offices in addition to the main hub to identify opportunities faster and work more closely with partners.

"In Europe, I think we absolutely overestimated what we knew about the external environment. It is a rich landscape of universities and incubators, and it is spread all across the continent," Verheyen said. "It was much more than we could see from our headquarters."

"Being out there and being proximal to the innovators was even more important than we initially thought and that is why we have boots on the ground in the most important countries at the start in Asia-Pacific," Verheyen said.

J&J has added two satellite offices to the London center - one in Israel and one in Russia.

Wu added, "The closer we are, we'll be able to build a personal friendship, and that friendship and trust is important in this part of the world."

Additionally, the sheer size of the Asia-Pacific region necessitates local offices.

"We want the business people sitting in the region so that whenever there is an entrepreneur in the area with an idea, we can come back quickly, within 24 hours, seven days a week," Wu said.

Local teams also can respond quickly to needs and opportunities that arise on the fly.

Drazan noted that close contact with partner Aduro BioTech Inc. helped to identify additional opportunities for collaboration.

In May, Aduro granted J&J exclusive, worldwide rights to prostate cancer products based on the biotech's live-attenuated double-deleted Listeria monocytogenes (LADD) immunotherapy platform.

Five months later, the partners announced a second deal in which J&J received exclusive, worldwide rights to an unspecified number of candidates for lung cancer based on the LADD technology.

Drazan said both cases were highly competitive, but "our team had been there at Aduro and so we became a highly regarded partner."

J&J also invested an undisclosed amount in Aduro's tranched $55 million series C round in June.

The satellite offices in Asia-Pacific also hope that communicating successes in one country to the academic and life sciences communities across the region will spark further innovation. "When Australia innovators can see success in other parts of Asia, they can then apply this or learn from this and it can encourage more innovation in that part of the region," Wu said.

Each office is staffed with people native to the country, he added.

"This will make it much easier for J&J to get into the network and build trust. To have Japanese on the ground in Japan will help close the loop in terms of finding assets and bringing them forward in a way that the innovator believes they will have the opportunity to add value onto them," Wu said.

"Culturally sensitive interaction means a lot, and when you bring it to the business world it can help. I wouldn't have been so articulate about it before I joined J&J but now I realize it is," Drazan added.

Early education

While Asia-Pacific may not be brimming with entrepreneurs just yet, J&J sees opportunity in the combination of the swelling ranks of young scientists with the pharma's expertise in translation and its ability to act as a facilitator to share knowledge across the large and fragmented region.

"In China alone, by the end of this decade there will be 120 million college grads and there is a lot of support from the government for life sciences. We are very eager to work with that young talent and give them the additional guidance, incentives and insights to be successful," Verheyen told BioCentury. "We can develop a network that we can grow for many years to come."

Wu added the new center hopes to grow the number of entrepreneurs in the region by working with other stakeholders, including VCs and start-ups that exist in Australia and Singapore.

"We probably will need to take a step back more towards earlier academic deals and then, after some time, find a good entrepreneur to run those assets," Wu said.

The entrepreneurs would come from a mix of returnees and current and future university and graduate students in China, Wu said.


The sixth deal announced last week was to establish a partnering office at Suzhou Industrial Park Biotech Development Co. Ltd. (BioBAY). The life sciences incubator houses more than 400 drug discovery, biotech, diagnostics, medical device and nanotech companies.

According to spokesperson Ellen Rose, someone from the Asia Pacific Innovation Center will hold regular "office hours" at BioBAY several times each month to work closely with and provide guidance to emerging companies and entrepreneurs.

In California and Boston, the Innovation Centers regularly host networking events that bring entrepreneurs together with investors; educational sessions on topics including clinical development, regulation and deal making; and other events aimed at fortifying the ranks of innovator-entrepreneurs.

A recent example was an Oct. 6 event in San Diego, where J&J hosted an educational session with investor Poliwogg to give start-ups and entrepreneurs an overview of the investor's key areas of interest and best practices when seeking funding. The Boston center held a similar session with Poliwogg on Oct. 21.

J&J also plans to work with VCs in China to develop more incubators and enlist their support for incubator companies to "make sure more of the original seeds that were started in China grow in China. This also applies to India, though in the longer run," Wu said.

The center does not have an office in India, or near-term plans to put a team there. The Singapore office is tasked with evaluating the opportunities in India.

Disclosure: none.



 

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