The top 25: Tom Heyman, Johnson & Johnson
Although US-based healthcare company Johnson & Johnson (J&J) had been making venture investments since the 1960s, the creation of Johnson & Johnson Development Corporation (JJDC) in 1973 and its unbroken history of taking minority equity stakes in third-party entrepreneurs marks it as one of the oldest and most consistent investors – perhaps surpassed only by mutual fund manager Fidelity in any sector.
Tom Heyman, leader for Johnson & Johnson Innovation–JJDC when he replaced Brad Vale in 2015, has done his best to continue the group’s finest traditions. During that time, it has remained one of the largest and most active groups, investing more than $400m in more than 30 investments last year.
In an interview with Andrew Gaule for his Question Time column in Global Corporate Venturing at the start of the year, Heyman said: “JJDC is the oldest corporate venture group in healthcare. It was created 45 years ago and it is amazing to see what foresight people had – management and leadership – at that moment in time, to start off with this corporate venture group at a time when there were not that many such groups, especially in healthcare.
“We are a separate legal entity reporting into Johnson & Johnson Innovation. We are involved in external innovation through equity investment in young companies that have products, technologies or assets that might be important to one of our key sectors in the future.
“It is a small team. It is not a venture capital fund in the traditional sense of the word, so we do not have a certain amount of capital assigned to us. We have access to J&J’s balance sheet, so we can make small to really large investments. Our investments range from a few hundred thousand dollars to sometimes more than $100m, depending on circumstances. So it is not a closed-end fund like you would see with a traditional venture capital group.
“Our investors are based in the ecosystem where a lot of innovation is ongoing, so they are together with the people in our four innovation centres. We have investors in Boston, California, London and Shanghai. We have one person based in Tel Aviv because Israel is such an important source of innovation, especially in the medical device sector.
“We are strategic investors in the first place. We are not financial investors. We do not invest in order to make money for Johnson & Johnson. We invest to build the pipeline and the portfolio of the sectors within J&J. So we look at opportunities and making investment in those companies that have assets or technologies or platforms that are of interest to one of the three sectors – medical devices, consumer or the pharmaceutical group.
However, in his interview with Gaule, Heyman added: “JJDC should start to play a more prominent role in looking at opportunities that do not easily fit today within the strategies of the sector, but are technologies that are potentially transformational towards the future. And trying to learn more about these technologies through an equity investment is something that is important.
“But in the end it is something that has to be in areas that have at least some support by key leaders within Johnson & Johnson. We have learned, from the past and from our own mistakes, that we might want to make an investment because it is something that we like, but it may never find a home within Johnson & Johnson because no one is interested in bringing it in or they do not see the strategic intent at all – then it is financial, it is not strategic anymore. And these things, then, often do not give us the returns we would be looking for.
“So investing in what we call white space – maybe that is not a great word, in potentially transformation technologies – is something I think is an important role we could play. But to me it is going to be very important that either the executive committee or the management committee of Johnson & Johnson support those kinds of investment, so at least they acknowledge that this is something that might be transformational for the future of Johnson & Johnson.”
As examples of its deals, Heyman told Gaule: “We have made a very important investment in a company we have co-created with Verily, which is the healthcare arm of what is now called Alphabet, Google before that. We poured in a tremendous amount of money to build a new surgical robot. We are putting in not just money. We have seconded people. They are working very closely with our Ethicon affiliate to develop instruments that would work with the robot.
“Another example is when we made an equity investment in a company based in California that is developing a completely new breast pump. Very innovative. We have put those people in touch with retailers, so that they understand what it takes to commercialise a consumer product like this one to the retail sector.
“We have an investment in a company that is developing a medical device to treat heart failure. They have a product in the marketplace in Europe to treat hypertension. They have some issues with respect to reimbursement. We have brought in our people to help them out in thinking through how to improve that situation. We have brought in our people to help them out in developing their clinical trials and their protocols.
“In all the companies in which we have a board seat, we will bring in, or we will offer at least, the resources of Johnson & Johnson. Those are the things that we do on an almost day-to-day basis, when we make an equity investment.”
JJDC’s newest area of investment is in consumer, such as its La Lumiere deal. La Lumiere is the developer of light-based phototherapy device to treat acne. JJDC contributed to a $20m series B round for the company in November 2014 and later J&J acquired it before launching its product under J&J’s Neutrogena brand.
Stacy Feld, vice-president at Johnson & Johnson Innovation–JJDC and GCV Rising Star 2018, for her profile this year said: “I see it as a great example of identifying a need, working creatively to advance the science and then leveraging J&J’s market expertise to bring the product to consumers on a global scale.
“It represents an important illustration as to how J&J collaborates with entrepreneurs to develop, commercialise and scale first-in-category products.”
JJDC launched its consumer investment practice five years ago but keeps the majority of its consumer portfolio confidential. Feld did disclose in her profile that the organisation has eight companies in the portfolio, including two successful exits, across a range of segments.
JJDC is one of the first corporate investors in the consumer market and one of the challenges it has faced is ensuring there is a clear firewall in place to prevent spillover of sensitive information from companies it is investing in to J&J and its consumer products divisions.
“As consumer investing expands, it will be important for newcomers to similarly demonstrate to entrepreneurs their process for managing confidential information – it is critical in gaining trust. Trust is essential to an effective board, building a strong management team and growing the company to reach its full potential,” she said.
This is an ethic Heyman has done much to encourage. Heyman has kept his ties with Belgium as since April 2012 he has been a member of the board of directors and the general assembly of innovation and research hub IMEC.
Heyman was from 2008 until November 2016 was CEO of Janssen Pharmaceutical in Belgium, responsible for its Beerse campus, which is one of eight research centres in Europe spending an aggregate €1.5bn-plus ($1.7bn) in research and development each year.
Beerse is also the site of J&J’s only incubator – called JLabs in Europe, after the company decided late last year to avoid setting one up in the UK as planned. Called JLABS @ BE, Belgium, therefore, was the location of its 10th JLabs, which can house up to 30 life sciences startups focused on innovations across the entire healthcare spectrum, including biotech, pharmaceuticals, medical devices, consumer and healthtech sectors.
JLABS @ BE benefited from €2.1m ($2.5m) of financial support granted by the European Regional Development Fund (ERDF) and the government agency Flanders Innovation & Entrepreneurship (VLAIO –Hermesfonds) in 2017.
At its longest-established JLabs, on the west coast of the US, it has 51 companies and 36 alumni.
Further down the coast, and J&J has 47 companies in JLabs San Diego – of which 11% are consumer. However, one of the interesting outcomes from its facility has been the number of partnerships between portfolio companies, not just to J&J itself. For example, Abilta Bio and Primordial Genetics, Amplyx and Linnaeus, and Xycrobe Therapeutics and Kode Biotech have all partnered with each other.
In Europe and more broadly, J&J has had an excellent record of coinvesting and working with partners, its leading syndicate corporate venturing peer is Switzerland-based Novartis, according to GCV Analytics, which reflects back to the experience and trust its approach has generated under Heyman and his predecessors.
Heyman was also responsible for acquiring companies for J&J, including Tibotec, Centocor, Cougar Pharmaceuticals, Aragon Pharmaceuticals, Covagen and Alios Biopharma, and “hundreds of transactions for both early and late-stage pharmaceutical products and technologies”, according to his J&J profile. So after 25 years in business development, adding corporate venturing leadership might seem almost straightforward, even in what was a record three years since he took over.
Heyman started at Johnson & Johnson in 1982 in its law department of the Janssen affiliate back in Belgium. Then in 1990 he was asked to come to the US as vice-president of corporate development for Ortho, which was one of the other pharmaceutical companies within the Johnson & Johnson family of companies. Then in 1992 he was then asked to lead the business development group of the pharmaceutical group of Johnson & Johnson.
Born in the Congo, Africa, and graduating with a master of law from the KU Leuven in Belgium, Heyman started out hoping to have a “real impact” on his country through foreign policy.
In a 2013 interview with PharmaBoardroom, Heyman said: “I am a lawyer by training. My dream was to enter the diplomatic service of Belgium but I quickly came to the conclusion that Belgium is too small a country to have a real impact on foreign policy. I therefore started to get more and more interested in international law and economics.”