J&J on the Hunt for China M&A

Johnson & Johnson (NYSE: JNJ) is using “external innovation” in China as a low-cost, highly inventive path to discover new drugs, seeking to solve unmet needs in China as well as the rest of the world. "We have to seek the best science and technology,” said Lily Lee, PhD, vice-president and head of JNJ Pharmaceutical R&D Asia, at a recent Shanghai biopharma meeting.Continuing her discussion of J&J’s plans, she told Reuters reporters, "We are especially interested in oncology, infectious diseases and metabolic areas, so M&As in these areas will be high on our radar screen.
" J&J’s investment will grow at double-digits, Dr. Lee continued, which she doesn’t consider surprising. "Because we are growing from a small base, anything we do is in double digits." In China, J&J will focus on meeting basic medical needs – the “affordable” market is her term – instead of the high-priced drugs that solve rare conditions. With healthcare reform, that market is the fastest growing sector, and it will make China the third biggest market for drugs worldwide next year – 2011.In 2009, J&J established a regional center in Shanghai that manages the company’s diverse R&D activities in Asia – Dr. Lee’s home base. It was put on the same organizational level as centers in the US and Europe.
In May of this year, J&J established a Joint R&D Center in Oncology with Tianjin Medical University Cancer Hospital. Its goal is to establish a center that meets international standards of research. J&J had previously formed a cancer biomarker R&D project with Tianjin Cancer Hospital. The Center will explore types of cancer that are particularly important in China, including China-specific variationsLast year, the Ortho-McNeil-Janssen subsidiary of J&J announced a collaboration with Hutchison MediPharma [AIM: HCM] to work on a novel inflammation/immunology target. MediPharma was put in charge of development activities, while OMJ has an option on the work, including an option to take over the development.Another J&J subsidiary, Xian-Janssen, launched a new drug in China in 2009 after winning approval through the Green Channel, an expedited approval process. Dacogen (decitabine) is a novel treatment for myelodysplastic syndrome (MDS). The incidence of MDS in China is so low that the SFDA based its approval on trials done outside of China.

**Published in "Seeking Alpha"