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07/11/2017

The Art of Building a Viable Ecosystem

By Kara Bortone, PhD - Director, Venture Sourcing & Development, Johnson & Johnson Innovation, JLABS

I come from a long line of scientists: my grandfather was an engineer, my father a marine biologist and my brother a neuroscientist. In my family, science was the only way to contribute to society. It was fine to have an interest in art and architecture as long as I kept science at the forefront of my career, and was published in Nature, Science and Cell. My existence was defined by hypotheses tested in experiments and measured by data.

And I was well on my way to reaching that goal. I had completed my PhD in Biochemistry at the University of Texas and landed a high profile post-doc position at The Scripps Research Institute in La Jolla, California. Our research group at Scripps was focused on elucidating the structures of ABC transporters, which are the proteins responsible for multi-drug resistance in bacteria and cancer cells’ resistance to chemotherapeutics. This was big and our group had the cover of Science to prove it. The only problem was that this research was expensive. You see, we had to use specialized detergents to extract and purify these membrane proteins and they can cost tens of thousands of dollars per month.

Finding the Funds

One day, my post-doc advisor told me there was a big fundraising event at Scripps and he wanted me to attend. To my surprise, I arrive at, for a lack of a better word, a gala with chairs wrapped in white linens, lavish food spread on a table and a small orchestra playing Blue Moon. I felt transported to some other dimension from my meager post-doc existence. I didn’t know anyone, but luckily I’ve never been afraid to talk to strangers. So, I grabbed a plate of ahi tuna, a glass of champagne and started to mingle. Much to my surprise, it didn’t take long for me to engage with a group of local philanthropists. They were interested in the work we were doing and some of them had family and friends that were affected by resistance to chemotherapeutics. One of the impeccably dressed women in the group asked she if could help support our lab for a few months and proceeded to hand me a check with six figures on it. This opened my eyes to a whole new world, a world of expensive equipment and materials that suddenly became attainable through my benefactor’s investment dollars.

This was my first experience in presenting to investors – and I was hooked. I realized that my real passion wasn’t doing bench work, it was spreading the word about the amazing discoveries we were making. Unfortunately, this progress comes at a cost and finding investors to support this research is one of the greatest challenges in our industry.

Fast forward ten years to 2012, and I find myself a part of the very first Johnson & Johnson Innovation, JLABS, an incubator for emerging life science companies in San Diego. We quickly expanded to the biotech hubs of Boston and the Bay Area, and last year, we started facilities in the emerging life science hubs of Houston, Texas and Toronto, Ontario, Canada – with our sights set on New York City in 2018.

Every day I meet new healthcare companies that are working on the biggest challenges that face our society: Alzheimer’s, diabetes and lung cancer, to name just a few. Because we’re a part of Johnson & Johnson Innovation, we have the means to provide a number of solutions to emerging companies. This support ranges from facilitating research collaborations to equity to lab bays in our incubators. I have to say, I have one of the coolest jobs in the world, as my role is to learn about the companies’ science and help them access resources to move their research forward into transformational new products for patients.

Components of a Collaborative Ecosystem

Being involved with emerging companies, I have become extremely passionate about ecosystems. How do we build ecosystems that stimulate collaboration? And how do we cultivate new ideas so that they can be commercialized and reach the patients that need them most? We all know the adage “it takes a village.” Well that applies to raising viable companies and products just as much as it applies to raising children. Sadly, there are many great discoveries made every day that never reach patients due to a lack of resources. Strong ecosystems can help ensure companies have the resources they need to forge ahead.

So, what are the components to building a great ecosystem? First and foremost, life science ecosystems exist because of innovation. To have a strong ecosystem, you need great companies with great ideas, which are usually rooted in solid academic research. But having a great idea isn’t the only factor that is important, the idea must address a problem that is relevant to the industry and be developed in a timeline that means it will be commercially practical. In other words, the timing must be right: if it is too early then the basic research hasn’t caught up and there isn’t a data package around the molecular target to build investor confidence in the approach. Too late, and the product will not be commercially viable by the time it reaches the market, which means the investors will never make a return. One of the things we do at Johnson & Johnson Innovation is apply our market insight to help give guidance on the commercial viability of a company’s product.

Secondly, human capital is critical. It is instrumental to have leaders that know what it takes to traverse the rocky terrain of research & development, jump through regulatory hurdles, and run the marathon of adequately funding a biotech company for the many years it takes to get a product to market. There is no doubt that having a brilliant scientific mind behind a company is critical, but those brilliant inventors aren’t always equally brilliant at business. You need someone who will keep eminent scientific minds focused on the practical aspects of what needs to be achieved. To fill that gap, Johnson & Johnson Innovation provides companies with access to mentorship and the option to form connections with C-level executives who can help companies maneuver the regulatory and funding landscape, as well as grow to scale.

Next, you need to have experienced people to do, as we jokingly like to say in the industry, the “real” work: the day-to-day research of collecting data, analyzing results and pushing programs forward. What does it mean to have a great team? In my mind, it isn’t about having a degree from Harvard or about being on your 10th startup – although those things are all great. It’s about resilience and being able to pivot in the face of adversity. This brings us to what might be the most critical component of building successful ecosystems - the investment piece. Without funding that spans that entire continuum of seeding, growing and scaling companies, the products will never see the light of day. A successful ecosystem must have or attract savvy angel and seed investors, as well as venture capitalists. Realizing not every community is as fortunate as Boston and the Bay Area, there are things emerging ecosystems can do to educate private investors so they become more comfortable in the biotech arena:

• Biotech regions can facilitate investor speed dates, which match private investors to fledging biotech companies.
• Some local governments provide tax incentives for biotech investments.
• Cross pollination from other regions is also popular, as many of these investors are based on the East and West Coasts.

Some firms, like Houston-based Mercury Fund, prioritize its investments outside the Tier 1 biotech hubs. In my mind, this is of the utmost importance as there is a wealth of truly great ideas in regions like Houston and Toronto that might never be brought to patients if it weren’t for VC investment dollars.

Translating Innovation

How do we fund companies so that they can translate innovative ideas into new solutions for patients? One thing is we can take a lesson from the playbook of IT companies. In the IT world, give a couple of entrepreneurs some seed money, a few years, and they can turn a new idea into the next internet sensation with a billion-dollar market cap. How can we make it just as easy to start a healthcare company as a tech company?

Incubation provides a way for companies to gain access to specialized infrastructure and core equipment without a lot of upfront capital. With this infrastructure, they can deliver proof of concept data or get to that next value inflection point that piques the interest of investors. Incubators also create a community where cross pollination of ideas can take place. At JLABS, companies collaborate on anything from “borrowing a cup of buffer” from their neighbor, to signing research collaborations with each other, to forming new spinout companies.

It is also the number and density of collisions between companies that is important to innovation. It is the interface of multidisciplinary teams where new ideas are developed and optimized. We can do a lot to stimulate these interactions. For example, at JLABS we host CEO Roundtables, safety meetings and even social happy hours, where scientists and executives can connect. As a result, 25 percent of our companies in San Diego have signed formal collaborations with each other. Without the infrastructure for these companies to collide, perhaps they would have never worked together.

The collaboration doesn’t just take place between the incubator companies. Johnson & Johnson Innovation houses the companies in our incubators with “no strings attached” – meaning neither equity nor right of first refusal are given to us. Incubator companies are offered mentorship and access to possible collaborations with Johnson & Johnson Innovation.

In addition to providing the physical infrastructure to move research forward, Johnson & Johnson Innovation has designed a series of seminars where employees give sessions on topics ranging from “How to File an Investigational New Drug,” to “Business Development Basics for Life Science Companies,” to Regulatory Affairs workshops. This commercialization curriculum creates a roadmap for advancing new discoveries from the bench to the bedside. Additionally, we run “Meet with” sessions where we bring in funders from governmental and not-for-profit organizations like the National Cancer Institute, the Gates Foundation and Wellcome Trust.

In addition to the four main components: basic research, great teams, investment and facilities, there are other contributors that help build healthy life science ecosystems. Strong organizations like BIOCOM, CLSA and BioHouston energize and unite biotech communities and lobby local governments for subsidies, tax breaks and matching funds to help support growing biotech ecosystems.

To quote Dr. Paul Janssen, “the patients are waiting”, so I’m proud to be a part of helping to build strong ecosystems that can support the development of products that have a profound impact on people’s lives.

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