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LIFESCIENCELEADER.COM JANUARY 2015 44 research BREEDING INNOVATION teach a research scientist team leader how to think like a venture capitalist. Business school professors from the U.S. and Belgium conduct didactic classes and facilitate projects. During the course work, teams develop business plans that include milestones and projected financing requirements. Willenbucher emphasizes the need to identify well- understood criteria from the beginning. "Milestones like start and stop dates and anything related to financing have to be clearly defined. The exit has to be explic- itly described from the beginning. From the very start, the team has to under- stand and execute on the goal of achiev- ing the next round of funding." During the course, team leaders cre- ate and refine "pitch decks," which they present to the JI board of directors so the directors can conduct due diligence and make informed decisions. "From a business point of view, we want to make sure that, at the end, these projects can stand on their own and meet future market demands," says Willenbucher. Currently the incubator has six ven- tures. Mistry leads a venture based on natural product discovery. There is a venture for autism. A team focusing on lupus is working on two projects, and there is a group researching a novel plat- form using a nonopioid pain product. A venture team is developing a multi- valent biological targeting MRSA, and a team is creating a tool to facilitate the development of drugs that target G protein-coupled receptors. PROCESS Ventures are given a period of two to four years to meet milestones and reach their end points. Speed and economy of resources become the guiding prin- ciples. The JI places few restrictions on how team leaders reach their mile- stones. "The scientists get financial support, but they're expected to run the projects like any business," says Willenbucher. Since these projects focus on science which might be outside the expertise of Janssen R&D;, a venture may outsource activities. This provides economy by reducing the internal footprint of the venture. It can also speed results, by going directly to an entity that has need- ed expertise rather than waiting to devel- op it internally. "Anything and everything that you could potentially do inside, you might do outside," says Willenbucher. Team leaders can and are likely to seek partnerships to support their research activities either internally or externally. "As an example of an external partner- ship," says Mistry, "one of our ventures is developing a clinical behavioral tool to better understand autism patients and how drugs may impact those patients. There are organizations like Autism Speaks which are very involved with that team. It's a broad opportunity for both the team and for Autism Speaks." In the case of lupus — another science outside the company's area of focus — Janssen may not have the infrastructure to fully develop a compound. The com- pany would be open to creating a joint venture with an enterprise that did have the expertise and resources. "In other research like early discovery programs such as natural product drug discovery, we're trying to move promising early- stage discoveries toward lead or NME status. Here, Janssen might partner with external entities to acquire financial support rather than create a full joint venture," says Mistry. KEEPING PROJECTS ON TRACK, MEASURING SUCCESS "Governance is a key aspect of this model," says Mistry. "Each of these ven- tures has a board of directors that the leaders report to once a quarter." During these meetings team leaders present progress reports on their research and discuss plans for reaching their next milestones. The board reviews progress, provides feedback, and offers opinions to the leadership. The Incubator itself has a board of directors composed of leadership from within the organization. The JI board of directors makes decisions about overall portfolio selection and current portfolio operations. Mistry says, "They answer questions like, 'Should a project receive continued financing? Should a proj- ect be accelerated toward an exit? Is a project doing so exceedingly well that Janssen can capitalize on it now?'" Governance ensures that a venture doesn't get off its planned course. Mistry says ventures are created like a start-up so it's critical they stay focused on their research and the milestones. " We're very rigorous in reviewing the financial and scientific decisions teams make to advance a program through its mile- stones," says Mistry. "If there are chal- lenges, the venture has to decide wheth- er it is investing its resources correctly or whether this research is fruitless." " We judge success on the ability of our team leadership to meet milestones and garner additional financing either from within the company, from exter- nal sources, or a combination of both," says Willenbucher. Although none of the projects has yet entered clinical trials, in some cases they've entered into pre- clinical development to do IND (investi- gational new drug)-enabling work. One of the lupus assets has been taken into product development, and the team is in some initial discussions with potential strategic partners. ADVICE AND LESSONS LEARNED "The essence of entrepreneurship is the creative use of resources," says Willenbucher. Biotechs and small research ventures have been successful in the discovery of NMEs with limited resources. He says the incubator model adopts the advantages of that entre- preneurial model while providing the breadth and expertise of a large R&D; organization. Willenbucher says the model is the vehicle, but the most important thing is finding scientists who are passionate about their project. Not every scientist or discovery is suited for this model. "Leaders operating under funding and time constraints will find the fastest and best ways to reach value inflection points," says Willenbucher. "The total- ity of the experience is that it drives the engagement of team leaders, and because of that, projects move very quickly. That's good news for innovation." L By F. Olds JANSSEN PHARMACEUTICALS R&D; ADOPTS A VENTURE CAPITAL INNOVATION MODEL