News | TMCx lands major partner in J&J

October 23, 2014

By Lora Hines | Houston Chronicle 

In a move touted as a way to position the Houston area as the nation's "third coast" for medical research, innovation and economic development, one of the world's best-known companies is joining the Texas Medical Center's new business startup accelerator.

Johnson & Johnson Innovation, a development arm of the global pharmaceutical and health care product company, is announcing Thursday that it will establish a business incubator within the TMCx, which opened this month to encourage medical startups by providing lab and office space as well as support staff, advisers and access to investors.

When it opens late next year, the Houston site will join three existing Johnson & Johnson Innovation J-Labs for aspiring entrepreneurs and another that is opening early next year. The current J-Labs are in San Diego, San Francisco and Boston - all established hubs of pharmaceutical and medical device entrepreneurship where many Houston startups have migrated to find funding and expand.

"This is a real validation of Texas," said William McKeon, the Medical Center's executive vice president and chief strategy and operating officer. "J&J could go anywhere. Texas is not just big. It's an untapped market. When J&J moves here, that's going to send a real powerful message. We'll be unstoppable."

The sprawling health care and research complex south of downtown, home to 5,000 doctors, 5,700 medical researchers and tens of thousands of students, receives billions in research funding, but it generates pennies on the dollar in marketable products.

The Johnson & Johnson deal represents a belated effort by the Texas Medical Center to capitalize on the potentially lucrative markets for pharmaceutical and other medical product development.

Commercial projects

The new J-Labs@TMC will occupy 30,000 of the 100,000 square feet set aside for TMCx operations. It will employ four people initially and have space for as many as 50 startups.

As at the other J-Labs sites, these startup companies will have access to Johnson & Johnson Innovation resources, including educational events, funding opportunities and research and development experts, but will not be required to give up equity or rights to their products to participate.

Startups accepted into the incubator could use the space for scientists in lab coats working with microscopes to develop a life-saving drug - or for computer programmers writing code that could be used to help diagnose medical problems.

Melinda Richter, who heads J-Labs, said Houston was picked because of the Medical Center's potential to transform billions of dollars of grant-funded research into commercial products. The hospitals and researchers in the complex have received an estimated $3.7 billion in research funding over the last five years.

"Houston has some of the best scientists in the world," Richter said. "We came to the Texas Medical Center and we were impressed by the depth of the organizations, the areas of focus of its researchers, their grant funding and their ambitions. There's amazing research going on here. We're committed to being here."

Neither Richter nor Texas Medical Center officials would disclose financial details of their partnership.

'Long-term plan'

J-Labs opened its first incubator in San Diego two years ago and has so far signed a dozen deals with startups, which can take a decade to develop a marketable product. Most startups are expected to fail.

"This is a long-term plan," Richter said. "It's going to take time. It's going to take patience."

The Johnson & Johnson deal represents the latest phase in an effort that Medical Center officials expect will solidify Houston's reputation as a leader in turning academic research into an active commercial center for pharmaceutical, medical device and digital health products.

"The arrival of J-Labs@TMC creates a resource-rich environment that will not only support new startups fueled by the numerous medical and research institutes in the region, but will also be attractive to investors and entrepreneurs in the strong Texas life science industry," Dr. Robert Robbins, the Medical Center's president and CEO, said in a written statement.

Walter Ulrich, president and CEO of the Houston Technology Center, the state's largest existing business accelerator and incubator, said TMCx and related efforts to capitalize on the Medical Center's research prowess will keep local entrepreneurs in Houston.

"Success breeds success," he said. "We are working so collaborative research will get commercialized. We're beginning to think about and get new businesses started."

Dan Eagleman, an entrepreneur and assistant professor of neuroscience at Baylor College of Medicine, commended the Medical Center efforts to help researchers who may not know how to turn their work into marketable products.

"It's not part of our training," said Eagleman, who has received business advice from his best friend from high school, a Harvard University business school graduate.

For example, he said, many researchers try to create products and treatments based on the information they spend years collecting, but they don't have access to capital and they don't know where to find investors to commercialize their ideas.

Business accelerators like TMCx typically host entrepreneurs for short periods, usually a few months. They focus on training researchers in business and giving them access to mentors and other professionals who can help determine whether their ideas are marketable.

In contrast, incubators like J-Labs give researchers on average a couple of years to develop and launch products, while also meeting with investors.

It is unclear how much business the estimated 1,400 incubators nationwide actually create, said Alejandro Amezcua, assistant professor of entrepreneurship at Syracuse University's Whitman School of Management.

After studying 18,000 businesses in 950 incubators, his research found incubators may prop up businesses that likely would fail, and many do.

Gauging success

A separate report released this month by the California Healthcare Foundation found that even though the number of health care-focused business accelerators has grown to 115 worldwide, from a dozen two years ago, it's too soon to gauge their success.

The average health care company doesn't see a return on investment for at least seven years, the report states.

Cities that figure out how to translate science into business can leverage billions of dollars in federal research and investor funding.

In 2013, the Boston area led the nation in the commercialization of life sciences, receiving more than $2 billion in research and nearly $1.4 billion in venture capital funding, according to Chicago-based investment management firm Jones Lang LaSalle.

Boston's life science sector employs more than 81,000 people, with half working in research and development.