JLABS executive on the ROI of a 'no-strings-attached' health tech incubator

NEW YORK CITY—When technology entrepreneur Venk Varadan co-founded startup Nanowear five years ago, he had an innovative idea for a cloth-based diagnostic monitoring tool using nanosensor technology. But he faced significant challenges when it came to tackling the nuts and bolts of building the business, such as supply chain, logistics, funding, and healthcare regulations.

“There are the manufacturing processes, you need to clear hardware with the FDA, and figure out things like reimbursement and cybersecurity. It’s hard to do that by yourself,” Varadan said while speaking at a technology-focused conference sponsored by Techonomy last week.

Nanowear is one of two dozen companies participating in the New York City program of Johnson & Johnson’s JLABS life sciences and healthcare incubator initiative.

“A partnership with Johnson & Johnson was paramount for a tech stack that complex,” Varadan said. Participating in the JLABS incubator program has helped the startup navigate the hurdles in the health technology space, he said.

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Johnson & Johnson launched JLABS seven years ago and the program now has 13 locations, with the NYC location opening last June. The NYC office, located in SoHo, was part of a public-private partnership that included $17 million in state funding. Kate Merton, head of JLABS-New York City, Boston, and Philadelphia, was also on hand at the Techonomy conference.

FierceHealthcare spoke with her to learn more about the JLABS model and Johnson & Johnson’s interest in digital health. Here's our conversation, edited lightly for length and clarity.

Fierce Healthcare: How does the JLABS model work?

Kate Merton: JLABS is the “no strings attached” innovation incubator arm of Johnson & Johnson. It’s part of the broader Johnson & Johnson innovation framework. We describe JLABS as having four parts. We provide low capital expense space for entrepreneurs to come in, with access to dry desks, wet labs and access to equipment. The other three parts are to help them on their journey when they spend two years with us, on average. We provide them with education and relationships with investors, which is incredibly important as we don’t take equity in any of the companies. The last thing we provide is mentoring through our JPALS program and give them access to experts in Johnson & Johnson to navigate the different pieces of information they may be lacking. We like to say that we help them with the things that they don’t know they don’t know.

We have a stringent selection committee process and when they come in, the companies have to have the best of the best in technology and science.

JLABS New York City location 

FH: What is the return on investment for Johnson & Johnson?

KM: There’s the tangible and the intangible. JLABS is a wonderful way for Johnson & Johnson to understand what things are going on out in the marketplace. We have our strategy and we get to see things that entrepreneurs might be doing in a different space, so it’s educational for us. With the JPALS program, it’s a wonderful way for our high-potential employees to be connected to entrepreneurs and see how they navigate so it’s continuing education for our colleagues. Although it’s no strings attached, some companies end up with a financial relationship with Johnson & Johnson at the end of their time, about 25% of companies, and that could be in the form of investment from our venture fund or a research agreement. At that point, it goes outside of JLABS and into the normal business relationship.

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FH: What are these startups working on?

KM: Johnson & Johnson functions in three segments: pharma, device and consumer. JLABS had been supporting the pharmaceutical part of the business, but more recently we’ve had companies coming in from all three spaces, as well as health technology. We have companies working in those different areas and that could be someone coming in with a new chemistry molecule that they are developing for a disease or it could be someone with a new nanowear technology device or someone with an idea around artificial intelligence to help us to do clinical trial matching. It really is a variety of scientists, technologies and entrepreneurs coming in. It’s a broad portfolio.

Some companies are working on direct-to-consumer technology and then others are working with the healthcare providers, so think data management tools, communication with patients. One health technology company developed here in NYC, Veta Health, is focused on helping patients to decrease their risk of hospitalizations, so it’s great for patients and great for health systems as it helps to decrease costs.

FH: How do you think the JLABS program will help to drive innovation in healthcare and life sciences?

KM: It’s interesting to think about an incumbent that’s so well-positioned. We’ve been going for 130 years, we’re the largest healthcare company. I think we have a role to play to help people with what they don’t know they don’t know. They may have a wonderful technology but they haven’t thought about the regulatory aspects that it's going to take to get it approved, or they haven’t thought about supply chain or marketing or how it is to work with payers. At Johnson & Johnson, that’s our business and we do it well. We have an opportunity to share with them our experiences. 

FH: Children’s National Health System in D.C. recently announced a partnership with Johnson & Johnson to open a JLABS life sciences incubator on its new campus. Do you see opportunities here in NYC or Boston to partner with health systems?

KM: Absolutely. When working with entrepreneurs, our role is to help educate them that health systems are the final customer. Knowing the needs of your customers is a really smart thing to do when developing your product. In working with entrepreneurs, it would be a good idea to partner with health systems and understand what their needs are so we can bring that information back.