* J&J's London office aims to talent-spot new drugs
* External deals an increasing focus across industry
* Scepticism over smashing together big R&D operations
By Ben Hirschler
LONDON, May 14 As Pfizer's pursuit of
AstraZeneca provokes uproar, another big U.S. healthcare
group is taking a much quieter path into the heart of UK
bioscience from an inconspicuous office off London's Oxford
Johnson & Johnson's life science "innovation
centre", which opened a year ago, represents a different
approach to drug development based on building networks and
scouting for small deals, rather than mega-merger consolidation.
Its team of two dozen scientists-cum-dealmakers, operating
in the shadow of the Debenhams department store, struck 16
agreements last year for promising new treatments from
universities and biotech companies in Britain and across Europe.
Rival drugmakers are also putting an increased emphasis on
doing external deals for early-stage science, but J&J has gone
further than most in decentralising the decision-making process.
It has set up similar talent-spotting innovation offices in
Shanghai, Boston and Menlo Park, California, in the past 12
"Other companies have two or three scouts in certain
countries, but they need to call head office to get a decision,
which means going to one committee and then another," said
Patrick Verheyen, who heads up J&J's innovation operation in
His team, by contrast, have autonomy to strike deals and see
projects right through until the "proof of concept" stage of
For many in the pharmaceutical industry, this
outward-looking approach represents the future, because tapping
into external science is vital if large corporations are to keep
up with fast-moving developments in basic science and
And that leaves some analysts wondering whether Pfizer's
$106 billion attempt to buy AstraZeneca - a move rejected by the
British firm - is actually focused on better drug discovery or
really all about tax and cost savings, as many critics charge.
"Pharma companies need to spend fewer biodollars internally
and externalise more, yet Pfizer seem to be arguing they can
succeed by pooling more intellectual capital in-house," said
Navid Malik, head of life sciences research at Cenkos
ONE PLUS ONE EQUALS LESS THAN TWO
AstraZeneca, for its part, says the notion that smashing
together two Big Pharma research departments leads to improved
productivity has been debunked by past large-scale mergers in
"When you bring two huge organisations together, our
industry tells us that it is hugely disruptive in terms of site
closures, role closures," Mene Pangalos, the British group's
head of early drug development, told a parliamentary panel on
Wednesday. "Overall, one plus one doesn't equal two - one plus
one equals one point something."
Still, the situation is not black and white.
Pfizer itself also does early-stage research deals - it
struck a tie-up with UK universities in rare diseases just last
week - and J&J has not shied away from some big acquisitions,
with its medical devices unit buying Swiss-based Synthes for $20
billion in 2012.
But J&J's business development work in pharmaceuticals is
primarily focused these days on acquiring individual
experimental medicines, whether at an early or late stage of
testing. As a result, about half of J&J's drug pipeline now
comes from outside the company, against an industry average of
around a third.
Interestingly, AstraZeneca also has a large proportion of
experimental drugs that were invented externally, following a
deal-making splurge by the company in the past few years, which
was designed to plug a gap left by patent expiries and a run of
in-house pipeline failures.
With his small team in London - plus satellite partnering
offices in Cambridge, Oxford, Manchester and Cardiff - Verheyen
knows his operation is just one cog in the larger J&J research
and development machine, which has interests spanning drugs,
medical devices and consumer health products.
But after years working on mergers and acquisitions within
the U.S. group's pharmaceuticals division, he sees a clear
rebalancing of the R&D model across J&J and the wider industry.
"There is a shift to external research, absolutely. Most of
the innovation is happening outside the walls of our
organisation," he said.
"We as taxpayers fund a lot of academic research, so if we
can help to make something from that academic research and help
bring products closer to market then that is good for
(Reporting by Ben Hirschler; Editing by Will Waterman)