Renee Ryan, vice president, venture investments, Johnson & Johnson Innovation – JJDC
Johnson & Johson Development Corporation was founded in 1973. Now called Johnson & Johnson Innovation – JJDC, the corporate venture capital arm of the diversified global conglomerate, has been busy not only looking for investments that enhance the New Brunswick, New Jersey company’s strategic priorities but explore the “white spaces” where the company has little expertise.
In a recent interview, Renee Ryan, vice president, venture investments at JJDC, spoke about what’s exciting in healthcare, her favorite portfolio companies and rookie mistakes that entrepreneurs make when approaching VCs. A slightly edited version of the conversation appears below. Ryan invests in both traditional medical devices as well as regulated consumer medical devices with a digital bent.
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MedCity: What is the most common or biggest rookie error that entrepreneurs make at these investor meetings?
Ryan: I don’t know if this is a rookie error or an overly passionate entrepreneur. Entrepreneurs sometimes have very strong assumptions of the market that they are going after and its fit within our portfolio. They are not always willing to leverage the experience or even the strategic insight that J&J may bring to the table around opportunities.
For me, I guess I am okay with that because, at the end of the day, the passion that entrepreneurs have about their technology and the opportunity is so vitally important to our business. Without that, we wouldn’t have entrepreneurship. I guess I would rather have an entrepreneur being very optimistic and overly committed to their program.
MedCity: Are you saying that entrepreneurs say that there is $X million market opportunity and that number is overly inflated?
A Deep-dive Into Specialty Pharma
A specialty drug is a class of prescription medications used to treat complex, chronic or rare medical conditions. Although this classification was originally intended to define the treatment of rare, also termed “orphan” diseases, affecting fewer than 200,000 people in the US, more recently, specialty drugs have emerged as the cornerstone of treatment for chronic and complex diseases such as cancer, autoimmune conditions, diabetes, hepatitis C, and HIV/AIDS.
Ryan: I think I am talking about that, but I am also talking about that specific opportunity’s fit within J&J. For example, I often get calls, or emails or sit in meetings where someone tells me that something is a perfect fit, and it’s a business that we are not even in — imaging technology (laughs). Or a field that we recently exited — the diagnostics field.
MedCity: Can you talk about an investment that you regretted making and what did you learn from that experience?
Ryan: We don’t really talk about those things. I think the challenge that we have, much like many corporations that are investing strategically, is that the investments are strategic at the time that we make it.
It’s like any business, it’s a people business. So if leadership at our operating companies changes or [our own] strategies change, that investment is no longer strategic. We don’t necessarily disclose that to our portfolio companies but it’s something that we are sensitive to.
MedCity: In that situation, what can you do? There isn’t much you can do, is there?
Ryan: There isn’t. You can pursue a secondary sale of the position or try to sell it back to the company. There are those types of things you can do, but ultimately if the investment had a good thesis around it when you made the initial investment, you can’t fault the company for our own strategy changing.
MedCity: We’ve been fascinated by the change in fortunes at Theranos. What do you think corporate VCs or in fact any VC can learn from this given that the company raised a ton of money? [This interview preceded the latest development in the sordid saga in which Partner Fund Management, which has poured $96.1 million into Theranos, sued it alleging securities fraud.]
Ryan: We did not have the opportunity to look at Theranos. I only know what we read in the various publications and articles. I think it comes down to something that we really make sure [is clear] and I think our innovation centers working with very early external innovation companies [also do] — it’s gotta be rigorous science. Whether it means having to re-do a study to prove out those results or dig into the clinical and the preclinical work that has been done – those are what is really important. The rigor that we bring to our business development initiative or our investments [is crucial].
MedCity: What sectors within healthcare really excite you?
Ryan: It’s in that zone of things that are likely to be strategic to J&J’s business. I am excited about the collaboration with Google that we have at Verb Surgical. I think there’s tremendous opportunity for robotics across the healthcare spectrum. So that’s one area I am super excited about.
Another area that I think it’s really interesting, and I think we are in the early days maybe the first inning, is this consumer medical device wave whether it’s some of the initiatives in digital health, wearables, or digital therapeutics. If you can get the right technology mix, I think there’s a wealth of opportunity in that area.
MedCity: When wearables started out, it was very much about the Fitbits of the world, and now it seems like VCs are asking consumer digital health companies to show more clinical data about how they actually move the needle in healthcare. Would you say that’s it’s this latter bucket that is more important?
Ryan: You are spot on. For us, we still think there is value in pursuing a regulated medical device. I think there is value in having an indication and clinical data to support the claims. There’s going to be a path forward where some of these devices may actually initially be regulated as a medical device or a digital therapeutic, but ultimately down the road, as those technologies are more adopted, convert into a consumer-oriented technology where it’s a consumer- first sale. But the things that we looked at in that space, the vast majority of them have been more regulated in terms of the FDA path or a 510(k) clearance path with a labeling.
MedCity: Within your portfolio, which companies do you find interesting?
Ryan: One of my companies just got PMA approval for a brand new inlay for the treatment of presbyopia- ReVision Optics.We have been an investor there for the last three years, so we are thrilled to have the company get an FDA approval. They actually didn’t have to go to for panel review, which is also exciting.
NeuroPace, — makes a cranially implanted neurostimulation device for the treatment of epilepsy — is an investment that we now we’ve been in well over 15. That company is now commercial and growing and doing tremendously well.
And then I have another company that is in the bioelectronics wearables space that’s a little bit in stealth mode and so we can’t say too much about it. Cala Health has been making tremendous progress and will be an interesting company in this therapeutic wearables arena.
MedCity: What’s the average size of your investments?
Ryan: We are stage agnostic and size-of-check agnostic. What that forces you to do is to be able to be part of a seed funding of an early stage company that may be a couple of hundred thousand dollars check, all the way to a much later stage, more substantial $10+ million later stage investment into an advanced technology.
We don’t want to be restricted in terms of the amount of capital we deploy if we see a great opportunity. If we see a great strategic opportunity, we have the flexibility to go after the and invest the appropriate money. We don’t actually have a set amount of capital to deploy every. We just deploy off of our balance sheet, but much like the VCs do, we do try to look at our returns and our performance in five-year increments to make sure that we are investing appropriately and generating the right kind of financial return [to fulfill] obligations to the corporation.
Photo: Johnson & Johnson Innovation – JJDC
