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Johnson & Johnson Hopes Its Bet on Biotech Start-Ups Pays Off

Saturday, 13 Apr 2013 | 11:12 AM ET
San Diego, New Biotech Hub
Wednesday, 10 Apr 2013 | 12:00 AM ET
Dr. Diego Miralles, Mohamedi Kagalwala, and Joe Pogliano talk about JNJ's investment in San Diego's biotech startup industry through Janssen Labs.

Down the street from one of the most picturesque golf courses on the planet is a grand experiment in curing deadly infections.

And Alzheimers.

And Parkinson's.

Janssen Labs is an endeavor by Johnson & Johnson to help biotech start-ups take their discoveries to the next level. Most will fail, but some will succeed.

Using office space in a facility not far from the Torrey Pines golf course in La Jolla, Calif., Janssen rents out turnkey office space—complete with lab equipment—to 22 small companies ranging in size from one person to 18.

"As soon as we unpacked our bags, got our reagents, we were ready to go," said Mohamedi Kagalwala, director of drug development for NeuroGeneration. The company of seven employees just completed Phase I trials for a possible treatment for Parkinson's Disease. "I've seen us grow here, and I think we would not have done this other than Janssen Labs."

The lab rents out the space, promising "no strings attached."

That may sound hard to believe but Dr. Diego Miralles, who runs the lab, says it's true.

"Every time I said there's no strings attached, there was a silence in the room, and someone would say, 'What's the catch? We don't believe you," Miralles said. "It's because this has never been done before."

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This region of San Diego prides itself on being a biotech hub, thanks to the focus on science at the University of California, San Diego.

Joe Pogliano is a UCSD professor who, along with his wife, made a discovery that the two are now trying to turn into a marketable product. Their company, Linnaeus Bioscience, moved into Janssen Labs in October.

"We're helping them find the next penicillin, and it could be discovered right in this room," said Pogliano inside his lab space. He is already licensing out technology which, in essence, does autopsies on bacteria in quick fashion to determine what kind of antibiotic works. "Everything you need to get going is here, the space, the equipment, and a lot of supporting infrastructure that people don't even realize they need."

Johnson & Johnson's Janssen Labs in La Jolla, California.
Source: Johnson & Johnson
Johnson & Johnson's Janssen Labs in La Jolla, California.

One of the challenges facing the community is that once start-ups succeed, they are sometimes bought by larger companies and moved out of the region. For example, Amyllin's San Diego operations are being closed next year by new parent Bristol Myers Squibb.

Yet the innovators keep coming. "It's an extraordinary place where people bet on the future, and they're constantly taking risk," said Dr. Miralles.

(Read More: 13 Biotech Stock Predictions for 2013)

Janssen Labs is expanding to provide more office space, which it will rent out to more start-ups. Miralles would not disclose the rents, only to say that they are attractive when you consider the equipment and infrastructure his company provides. Rents are month- to-month, and those applying need to prove they have the capital to cover the costs, plus prove they are working on a health technology for an "unmet need."

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If there really are no strings attached, is J&J being completely disinterested? No. "I strongly believe everything is personal, and that's why San Diego is so special, because in San Diego everything is personal," Dr. Miralles said.

"We're hoping that goodwill, that relationship with [the start-ups] at the end of the day will put us in a preferential position when that company wants that product or that technology licensed out."

—By CNBC's Jane Wells; Follow her on Twitter: @janewells

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