October 8, 2014
By Riley McDermid, BioSpace.com Breaking News Sr. Editor
Big pharma is beginning to understand the “startup ecosystem” and learning to “get small to think big” in its quest to find the most innovative new companies and offer them partnerships that benefit both parties, said Ken Drazan, director of Johnson & Johnson’s Innovation Center in California, said this week.
Drazan made the remarks as a presenter at the BIO Investor Forum at the Palace Hotel in San Francisco Oct. 7. The conversation was moderated by Deepa Pakianathan, a general partner for Delphi Ventures who leads the firm’s biotechnology investment activities.
Johnson & Johnson was one of the first large biotech companies to fund its own set of incubators, with two currently in La Jolla and South San Francisco, and one solo project on its way in Mission Bay. Overall J&J has four incubators with smaller offices across Europe, Asia and the U.S., as well as a 40 year history in investing in companies.
It offers everything from laboratory space, business model development, and product design guidance, as well as research grants and flexible partnerships with biopharma startups, which have been much in demand lately, he said.
“Right now there is an unstoppable wave of large companies trying to figure out how to be small, which is as much a cultural change as it is trying to figure out what kind of products they want to be associated with,” said Drazan, adding that larger biotech firms are smart to hire younger, often non-affiliated partners to help point out a company’s value.
“You really need the younger base of human capital, you need those Millennial and Gen Y eyes to really understand that the entrepreneurs are trying to create,” said Drazan. “Your infrastructure needs to look more like theirs, to create cultural affinity.”
The need for large companies to help guide younger biotech startups through their biggest market year in decades—and a rash of IPOs—is acute right now. A study released last week by the National Venture Capital Association and Thomson Reuters found that initial public offerings from the biotech sector accounted for more than half of the 23 deals done in the third quarter.
It was the sixth consecutive quarter with more than 20 IPOs, according to the NVCA 2014 Yearbook, prepared by Thomson Reuters, with 23 initial public offerings by venture-backed companies—13 of which were solely biotech firms. At the same time, Drazan stressed that although larger, marquee-name companies may have the temptation to act in a more traditional boardroom manner, they need to understand both sides of a startup partnership.
“We understand what it’s like to be a fiduciary, so even though we have a deep interest in acquiring assets and companies, sometimes we need to act in support of a company as opposed to commercialization,” said Drazan.Ultimately, respecting a startup’s expertise is key, he said. “That’s where the rubber meets the road, in terms of rolling something out globally,” said Drazan. “We might be across the table from someone very experienced in something very narrow, and so we let them handle that portion, while we bring what we know, which is doing large-scale global development. When find a partner, we find a way to bring our collaboration to them.”
