Media release from GlobalData

LONDON, UK (GlobalData), 19 September 2012 - On September 18, 2012, Johnson & Johnson announced its plan to create four new innovation centers aimed at identifying early-stage acquisitions, partnerships and investment opportunities to fuel its global healthcare business. The centers, which will be established in California, Boston, China, and London, will be staffed with science and technology experts and possess local deal-making capabilities, with flexibility to adapt deal structures to match early-stage opportunities. In addition, they would focus on areas where J&J is already strong, such as immunology, oncology and infectious diseases, while looking for breakthroughs in new areas that address unmet medical needs. According to the head of the company's pharmaceutical unit, Paul Stoffels, the objective is to significantly strengthen J&J's capabilities in bringing on board more products across the drug, medical device and diagnostics, and consumer units, from the biotechnology and academic communities.
Furthermore, he noted that the current process by which breakthroughs at academic centers are transferred into marketed products is fragmented. Usually, scientific breakthroughs at academic centers are transferred to relatively small or newly created companies, after which venture capitalists and investors provide funding for further research. Afterwards, the product or company is acquired by a larger biotech or pharmaceutical company, which fully develops the product, obtains regulatory approval, and commercializes it. J&J has seemingly found a better way to organize this process, and setting up these innovation centers is at the core of its plan.

GlobalData believes that the significance of the planned locations of J&J's four regional innovation centers should not be lost amidst the announcement. California, Boston, China, and London are some of the world's leading innovation hotspots and could contribute immensely to J&J's plans for sustainable growth and development. The Bay Area in California, made up of three submarkets - South San Francisco, Mission Bay/China Basin, and the East Bay - is regarded as one of the premier locations for biotech and other life science companies. The region has a strong intellectual capacity, spurred on by academic support through grants, scholarships, and internships by companies such as Genentech and Amgen; innovation capital, driven by the partnerships of the University of California at San Francisco (UCSF), Stanford University, and the University of California (UC) at Berkeley with healthcare, biotechnology, and pharmaceuticals experts to develop some of the most cutting-edge advances in medicine; and several large centers of excellence hosted by local universities, such as UC Berkeley's Cancer Research Laboratory and Stanford's Genome Technology Center. Similarly, Boston is a leading global industry cluster that supports various aspects of the life sciences industry including biotechnology, pharmaceuticals, medical devices, diagnostics and bioinformatics. Consequently, the industry's critical mass in the area drives the establishment of new companies and venture capital investments. Furthermore, Massachusetts is home to five of the top eight National Institutes of Health (NIH)-funded hospitals in the United States, Massachusetts General Hospital, Brigham & Women's Hospital, Dana-Farber Cancer Institute, Beth Israel Hospital, and Boston Children's Hospital, each a global leader in biotechnology research. China and London have similarly strong biotech clusters, not to mention the fact that the former is a fast-growing emerging market, which could potentially serve as a means for J&J to strengthen its presence and achieve market penetration in the region.

By setting up these innovation centers, J&J would be hoping to quickly identify and tap into technological advancements that have the potential to benefit the health of patients. This remains one of the advantages which smaller, more nimble biotechs have over large pharmaceutical companies when it comes to snatching up potential blockbusters. These companies do not have to jump over mammoth bureaucratic hurdles and so are more in tune with academic and research institutions, thereby getting most of the 'good stuff'. Innovation drives healthcare and so if a company wishes to be a major player in the life sciences, what better way to do this than to be closer to its source than its competitors? J&J is not alone in setting up innovation centers at strategic locations around the world. The company would not be a first-mover in China, for instance, considering that AstraZeneca set up an innovation center there as far back as in 2007. However, J&J won't care much about that. What matters most is that these regional centers are functional, effective, and able to provide the much-needed innovation necessary for differentiation in the highly competitive global pharmaceuticals industry.