Johnson & Johnson appears to be the next big pharma company looking to test out the incubator model as one way to spur innovation. According to an article in the San Diego Business Journal, the big pharma company is interested in renting space to entrepreneurs that would have access to J&J’s equipment and technology at its research site in La Jolla, Calif. Diego Miralles, facility head at La Jolla, tells the SDBJ that up to 17 small biotechs could be housed at the site. The first biotechs could be moving in as early as this year.
Many will recall that Pfizer established an incubator, also in La Jolla, in 2007. So far only three companies—Fabrus, Intherix, and RGo Bioscience–occupy the space there, and, as the article points out, no new firms have been signed on since Pfizer’s merger with Wyeth. Biogen Idec seems to have a similarly slow start to its incubator, also launched in 2007. So far, the big biotech’s incubator, bi3, has only invested in two companies, Escoublac and Provasculon.
An incubator can offer some advantages over the traditional VC funding route. In addition to cash, companies get space in often well-appointed digs, infrastructure, scientific support, and access to bigger firms’ business acumen. On the downside, the deals also come with strings attached: generally the big pharma firm gets a stake in the companies in which they’ve housed in their incubator.
Other companies have taken a different tack. The Novartis Option Fund makes seed investments in companies with early-stage technology in exchange for a stake in the firms and the first crack at any discoveries they make. With much deeper pockets—the fund started out with $200 million—Novartis has made a substantial number of investments, including some “opt-ins” on drug candidates.
The jury is out on whether incubators, internal investment funds, or some other measure will actually be a winning proposition for big pharma. But the slow start for Pfizer and Biogen’s ventures might cause J&J to keep its expectations low for filling its space with those 17 firms.
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