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Q&A: Head of J&J's COSAT on 'Renting to Own' and Other Tech-Transfer Models

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garry.jpgNAME: Garry Neil

POSITION: Corporate vice president, Corporate Office of Science and Technology, Johnson & Johnson

BACKGROUND: Senior vice president, then president, of drug development, J&J Pharmaceutical R&D; various senior-level positions Astra Merck, Astra Pharmaceuticals, Astra Zeneca, and Merck KGaA; and various faculty positions at the Ludwig Institute for Cancer Research, University of Toronto, University of Iowa College of Medicine, and University of Pennsylvania

As a perceived patent cliff looms for a number of multi-million-dollar drugs on the market, pharmaceutical companies have in recent years scrambled to replenish their R&D pipelines, and have increasingly looked toward universities and non-profit research institutes to do so.

Indeed, "collaboration" was the watch word at last week's Biotechnology Industry Organization annual meeting in Atlanta, as many large pharmas and biotechs shared their new strategy of partnering and openness with the philosophy that the rising tide floats all boats.

One such company that has bolstered its external partnering in recent months is Johnson & Johnson. For example, through its Corporate Office of Science and Technology, or COSAT, J&J has in recent months committed $750,000 over five years to the Massachusetts Institute of Technology's Deshpande Center for Technological Innovation; and has continued to provide undisclosed funding to specific projects to research projects under the Maryland Technology Development Corporation, or TEDCO.

However, the pharma giant has not necessarily followed in the footsteps of its rivals, many of which have inked multi-million-dollar, broad-based sponsored research pacts with universities and non-profit research institutes in recent years. Notable recent examples include separate drug-discovery alliances by the Salk Institute with Ipsen and Sanofi-Aventis (see BTW, 1/16/08 and 4/1/09); partnerships between Vanderbilt University and Janssen Pharmaceuticals, and Northwestern University and Baxter (see BTW, 1/14/09); and pacts between the University of California, San Francisco and Pfizer, and GlaxoSmithKline and the Immune Disease Institute (see BTW, 6/11/08).

Last week at BIO, BTW caught up with Garry Neil, vice president of COSAT, to discuss his thoughts on the recent partnering trend, as well as J&J's collaborative activities, particularly with academic institutions. Following is an edited transcript of that interview.

J&J talked a lot at BIO about its philosophy of open innovation and collaboration to facilitate innovation in product and technology development. Is this a relatively new strategy for the company?

I'd say that this is a natural evolution of our strategy rather than being a brand new strategy. For a long time we've prided ourselves at being one of the premier partnering companies in the biomedical industry, including partnerships with academic institutions, small companies, and large companies, as well as public-private consortia.

But like others, there is no question that our activities in this area have ramped up, and we're devoting more resources and time to it. We also have higher expectations for return on our investments in this space.

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Why are pharmaceutical companies, including J&J, ramping up in this area? Is it that if one pharmaceutical company does it, they all do? Or is there a real lack of innovation and early-stage product development?

We feel that there is an enormous amount of innovation at universities, research institutes, [and] small companies that we need to take advantage of.

Our internal innovation over the last several years has greatly improved. We're more productive than we've ever been in our device, consumer, and pharmaceutical and biotech groups, and we have some of the best pipelines in those areas in the industry.

At the same time, we know we need to do even more. We are the largest healthcare company in the world, and we are committed to growth. In order to be able to do that, we've got to continue to improve our internal R&D engines and we need access to additional external sources of innovation. We seek external partnerships both to source new product and business opportunities, [and] to find new technologies and models to enhance our internal capabilities. So we're definitely putting more emphasis on external innovation and partnering, but it's not necessarily coming at the expense of what we're doing internally – we're just trying to make it all more effective and efficient.

How does your office, COSAT, support this strategy?

We've been in this business for a long time. COSAT was founded 31 years ago [in 1978, and] was J&J's answer to some of the unique aspects of the way we're organized. We're purposefully a very diversified and decentralized company, organized in three major sectors: pharmaceutical and biotech, medical devices and diagnostics, and consumer. Under each of those sectors there are a series of companies, many with their own internal R&D organizations. This was true when COSAT was founded, although we had fewer companies than we do today, and we were a much smaller business. Nevertheless, the complexity was there as it is now.

We recognize that to succeed the individual businesses and their R&D organizations have to focus on their core. But J&J is managed for the long-term and individual companies don't necessarily have the luxury of looking at what’s over the horizon, say 10 years out or more. COSAT was created to address those needs. We were purpose-built as a small, catalytic science and technology group, as opposed to an R&D group. Our charge was to build an internal and external creative network, including academic institutions, small companies, and others, to seek and invest in potentially disruptive and transformational long-term innovation opportunities and to look across the sectors and identify opportunities to catalyze early investment opportunities with our internal partners. The group has continued to follow that path ever since.

Over time we've taken on some additional roles in providing scientific input to our policy groups when needed. We can provide support to individual businesses when they run into potential technical challenges and issues, since we have such a large external network of scientists. And we also have a large internal network of thousands of scientists and engineers across all of our operating companies. But because they work at different companies all over the world, they don't necessarily know each other. Since COSAT is plugged into this network and has created collaboration tools, we can help our internal scientists make connections to solve technical challenges and to stimulate productive collaborations and convergence.

A public organization with which J&J's COSAT has done a lot of work over the past few years is Maryland's TEDCO, a partnership that has also spawned several academic collaborations for your company (see BTW, 4/29/2009). Can you provide a little more detail about your work with TEDCO?

Along the continuum of grants and investments that we make, this is one that we like as a potential sweet spot. TEDCO was formed in 2000 under a grant from the state of Maryland. It's strictly for Maryland institutions and government labs, and the focus is more on translational projects. We've provided some funding; and we have somebody on the board. We, along with the other sponsors, get to look at different opportunities that come through TEDCO, and we have the option of investing in some of those.

But we do more than that, and I think this is the value-add. We bring expertise in product development, and suggestions about unmet need and market potential to collaborators to help move products in the direction of greatest value and with the highest chance of success. For instance, our scientists might say to an investigator, 'Well, this particular model that you're using may not work, or is probably not going to be very convincing to our scientists or other external partners to whom you might want to license it;' and they might suggest another model, as well as technical advice on how to set it up and use it. We've done that, and we've made significant investments, though we can't be specific about how much, over the last several years. And we've looked at making a number of individual follow-on investments, and some of those have led to deeper collaborations and licensing deals.

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You also recently committed $750,000 over five years to the corporate program of the MIT Deshpande Center (see BTW, 5/13/09). Are the goals here similar to those in the TEDCO collaboration?

Yes, they actually are. We really like the Deshpande Center. It focuses on [translational] projects that are far enough along that they have the potential of spinning out of MIT within a couple of years. As a corporate sponsor of this, we get to look at all of Desphande’s initial life sciences proposals with an option of making further investments, including potentially entering into a venture or investing equity. It's very early days in the partnership, but the quality of MIT and their investigators as well as the track record [of Deshpande] in terms of forming spinout [companies] make us very optimistic.

Will the money that J&J has committed be parsed out to support specific projects on a case-by-case basis?

Deshpande uses that money for project seed funding, but as I mentioned we get a look at many great proposals and can make additional investments in some of these if we choose.

None of these partnerships give us rights to anything up front. But this is something that we are pretty adamant on. And it's somewhat unique, I believe. We go into these investments without asking for any rights. The relationship and the collaboration is what's really important to us is. If that chemistry is good, and we're adding value to this, then when there is something to value, we can have a discussion, and we feel that we'll be in the best possible position to be able to obtain those rights. Ultimately we do want rights to any intellectual property, but in the beginning of these collaborations, it creates a lot of unnecessary administrative discussions trying to value things that don't yet exist.

On that note, there is a perceived widening gap between what pharmaceutical companies want to in-license from universities and the early-stage nature of many of those technologies. Do you see this widening gap, and what can be done to address that? What does J&J usually like to see before it considers licensing a technology from a university?

It depends on the nature of the technology and opportunity, [and] on how much of a … transformational technology it is. We might want to get in earlier, and take a bigger risk on something that was going to be … a real game changer.

But to the specific point, if we're looking at medical devices, we want to see something with enough data to give us a reason to believe this really could be an interesting and unique product. And then we try to construct a milestone-driven program with the investigator where we can lay out what it would look like to get them to a working prototype, where we're starting to generate a little bit of data.

Recently, to help bridge the gap, we've been doing what one of our scientists calls 'rent to own.' We still have no rights, but we've internalized some of the experimental work. We give the data back to them, but because we know we could go faster if we already have a model up and running, we can either be convinced by our own data; or not, in which case they still have the data, so it's nothing lost for the potential partner. But for us, if it's the right opportunity, we're willing to do that.

And I think increasingly we want to help them generate the data they need in the most efficient way – kind of the minimal data sets they need to generate to convince us or another partner that it's worth going forward. We can come back and fill in the gaps later on, should it look promising enough.

Many of your competitors in recent years have formed broad-based, multi-million-dollar partnerships with academic institutions in specific therapeutic areas. Is J&J doing anything like that, or has it considered it?

We've done things like that in the past, but we're much more inclined now to take a different approach to everyone’s benefit. We know that most universities and faculty are most concerned about seeing their innovations help patients and want to facilitate that with corporate partners when it makes sense. Of course we are completely aligned with this.

So we don't believe that the best use of money with the university partner is to just dump a big grant on them and see what comes out of it. We prefer what we call "co-managed funds," where both we [and] the university put money in, generating a grant pool to which investigators at the university can apply. Then we work together to select specific projects. We try to identify appropriate J&J collaborators when that makes sense to help the project progress. This is usually viewed as a “win-win” and has had a pretty good success record for publications and further funding, either from us or elsewhere.

Increasingly we like to set up a master service agreement at a corporate level with universities that will enable us to bring in more focused proposals more easily and reduce the bureaucracy, and to more easily explore things that may go in different directions because of convergence. Many times a project we originally thought was going to be, for instance, an oncology opportunity turns out to have really interesting anti-inflammatory properties. We want to be able to go in that direction quickly when it makes sense, and a master service agreement helps with that.

Are there specific biomedical areas that you tend to look more to academic institutions for?

We describe ourselves as being very broadly based in healthcare. So in one sense, we're interested in a pretty wide range. But we have recently gone through an exercise, which we're just completing, of looking at specific areas of greatest interest for the long term by understanding what the individual operating companies are interested in, and where we think the science and the unmet need are most promising.

When we’ve completed this we plan to let our partners see it. But right now, I can say with certainty that we're very interested in regenerative medicine, neurostimulation, oncology, diabetes and metabolic disease. But I wouldn't want to discourage from coming to us with great ideas in any area.

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