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An investor speaks: How can partnering with pharma impact the success of biotechnology start-ups?

Fiona MacLaughlinFiona MacLaughlin

Fiona brings more than 20 years of experience in the life sciences industry including over 10 years as an investor to Johnson & Johnson Innovation – JJDC, Inc (“JJDC”). She is based at the Innovation Centre in London. On the 1st of July Fiona moderated an online event hosted by Johnson & Johnson Innovation where investors discussed the relationship between start-up success and collaboration with pharma companies from early to late development. A recording of this session can be viewed here. Following the online event, Fiona shares some additional insights with us.

“My recommendation is that start-ups carefully consider a relationship with pharma at all stages of development.”

1. What might a collaboration with a pharma company bring to a start-up?

A recent Nature publication1 suggests there is a relationship between start-up success and collaboration with pharma companies. The relationship with pharma companies can take on a number of different forms. For instance, a biotech start-up may get access to skillsets it doesn’t have such as translational insights. This may result in bringing an invention from the bench to patients more efficiently via a collaboration. A pharma partner could bring strategic insights to differentiate a technology and position it versus the competition, or a deep understanding of commercialization and market trends.

As Johnson & Johnson Innovation we work with start-ups in a number of ways: (1) via equity from Johnson & Johnson Innovation – JJDC, Inc. (“JJDC”), as an early- or late-stage investor, (2) through our Johnson & Johnson Innovation – JLABS incubation model, (3) directly through Johnson & Johnson’s R&D organizations as a collaborator, or (4) as a commercialization, licensing or acquisition partner with one of Johnson & Johnson’s operating companies. My recommendation is that start-ups carefully consider a relationship with pharma at all stages of development and start conversations early to better understand the role that pharma can play.

“A start-up should be clear up-front what it hopes to gain through a pharma relationship.”

2. For an entrepreneur, what can be drivers to partner with pharma?

A start-up will typically benefit from raising its profile by forming a relationship with pharma. Pharma companies are often regarded as risk-averse, so cementing a relationship can potentially help create a sense of FOMO (fear of missing out) in other pharma companies.

Second, an investment or other type of relationship consolidated with a corporate VC or pharma company validates that start-up and its technology, which will have gone through a substantive and rigorous due diligence review. Combined with the translational perspectives of pharma, the start-up might reach Proof of Concept sooner, with creation of a differentiated dataset.

Finally, the start-up’s financial valuation may be positively impacted.

A start-up should be clear up-front what it hopes to gain through a pharma relationship. Is it a positive and near-term impact on its bank balance or longer-term impact upon share price, or is it development capabilities?

“Creating the optimal conditions to do a deal can be challenging.”

3. What do you see as important challenges for start-ups in engaging with pharma?

Creating the optimal conditions to do a deal can be challenging. Johnson & Johnson is a large and complex organization. It would help start-ups to better understand how we work. Johnson & Johnson Innovation colleagues can help with that.

A start-up should determine what datasets a pharma might want to see, or a particular use case in which a pharma partner might be interested. Second, start-ups should try to understand pharma cycles and timelines including prioritization of budgets and revision of R&D strategy. Third, people are key. It would be pertinent to know who is the decision-maker and what role does the pharma/corporate investor play? Keep an eye out for change. People leave and strategies change. Listen to the information being shared!

“The art is to keep open communications going.”

4. Once the deal is done, how can start-ups get the best out of their relationship with the pharma company?

The deal construct and expectations between a start-up and the pharma company will have emerged from early-stage conversations. If the partnership is an investment, the pharma investor may also join the start-up’s board of directors as a Non-Executive Director (NED); if it’s incubation, you may have a mentor from within Johnson & Johnson.

The key is finding contacts and champion(s) within pharma and building strong relationships with them. They will be your internal guide. The art is to keep open communications going. Changes can create challenges along the way so be ready for this. Leveraging a strong relationship makes it easier to adapt and can potentially lead to even more successful outcomes!

1) Source: Nature Biotechnology | VOL 39 | March 2021 | 266–269 | www.nature.com/naturebiotechnology, accessed at https://www.nature.com/articles/s41587-021-00821-x.epdf?sharing_token=SKt4qGXXElDjH89BdsVXatRgN0jAjWel9jnR3ZoTv0M1EuThoKObn5UvZWIqWcOLy_J6CGJHNjN0GxvBYYagcIoiGoPKubU-RoVQ8lcIoHPjQUqxrTyH7B2sLb3Wfu8jSBBBXZHwqEdgEc5fQYdlRknQRK2UGBCl26_1Bt-Ghrk

If you want to learn more about this topic, watch the recording of the webinar hosted by Johnson & Johnson Innovation on the 1st of July 2021!

Are you interested in incubation, collaboration, or investment with Johnson & Johnson Innovation? Please get in touch!