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LIFESCIENCELEADER.COM JANUARY 2015 42 research BREEDING INNOVATION Faced with diminishing returns on R&D; investments, large pharmaceutical companies are searching for innovative ways to successfully identify, develop, and market products with financial viability. Yet small discovery companies and biotechs continue to outpace large pharma in the approval of NMEs (new molecular entities). F R E D O L D S Contributing Editor Janssen Pharmaceuticals R&D; Adopts A Venture Capital Innovation Model By F. Olds JANSSEN PHARMACEUTICALS R&D; ADOPTS A VENTURE CAPITAL INNOVATION MODEL hese smaller companies seem more able to adapt and adopt new technologies nimbly to meet changing landscapes. Janssen Pharmaceuticals is meeting the challenge by adopting a small venture discovery model, the Janssen Incubator ( JI). Every year scientists in Janssen's R&D; department make discoveries outside Janssen's areas of focus. While Janssen recognized the potential of many of these discoveries, it also recognized two obstacles. First, developing these find- ings would draw resources from current projects, and second, Janssen did not have expertise in these research spaces. In 2010, instead of selling the discoveries, the company decided to allocate a slice of R&D; resources to develop a system to select the most-promising targets for further research. The result was a model that had focus, speed, and economy. This was the genesis of the JI. THE RATIONALE FOR THE INCUBATOR Sanjay Mistry, Ph.D., head of business operations at the JI and lead of natural product discovery, says, "The JI is an operational model which ensures we do not leave high-value assets on the shelf." He says it's an opportunistic approach to create value in science outside of Janssen's current focus areas. The end- point of a JI project might be the start- ing point for NME pipeline development internally. It could also become a start- up, a joint venture, or some other entity externally. "At its simplest level, the JI is an entrepre- neurial approach to internal innovation," says Rob Willenbucher, M.D., head of JI and head of Janssen cell therapy. "It's a way for us to fulfill the Janssen mission of transformational medical innovation." The model is very similar to that found in small venture capital R&D; projects. Janssen forms small teams and gives them the resources necessary to meet milestones along the research trajecto- ry. Both the teams and the resources are what Janssen refers to as "ring fenced." That is, they are dedicated solely to the project. Willenbucher says among the lessons learned is, "The teams can't be split amongst other priorities, and the teams need to know that the allocated financial investment is there for them." Projects are selected annually. RFPs are solicited from scientists within Janssen for promising research projects outside of Janssen's areas of focus. The selection of proposals is based on a number of factors. For example, leadership looks at the underlying science, the address- able unmet medical need, the ability to identify milestones that have clear asso- ciation with value creation, reasonable feasibility for success, or whether the project would benefit from the JI model. During the selection process, there are cases where the science looks very good but feasibility may be low. In one case this year, two scientists came for- ward with very innovative science, but it was so early that it was hard not only to develop a business plan, but even to define a starting point. In cases like this, the board tries to find a home internally to provide funding to develop the science more fully. When that happens, the plan is to present those projects to the JI again. The JI leadership knows that scien- tists most likely do not understand the business or financial aspects of a venture project. So after the first cut through the RFPs, a group of project leaders are selected to attend Janssen's Entrepreneurial Boot Camp. It is an eight-week educational program to T