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As the pharmaceuticals industry reinvents itself in response to dramatic scientific discoveries, it’s turning to some relatively small companies to find some of its biggest innovations.

That trend presents some big potential advantages for Iowa, says David Norton, head of Johnson & Johnson’s pharmaceuticals group.

“This is a great opportunity for Iowa to move from agricultural-based biosciences to human biosciences,” Norton told a group of about 100 business leaders during Innovate Iowa! a breakfast panel discussion held last week in downtown Des Moines.

Norton, is also the incoming vice chairman of the Pharmaceutical Research Manufacturers of America (PhRMA), whose member companies in 2008 invested an estimated $50.3 billion in research and development for new drugs.

He was joined on the panel by Doug Reichardt, chairman emeritus of Holmes Murphy & Associates Inc. and chair of Innovate Iowa, an initiative launched in November to advance the biotechnology industry in the state. Also on the panel were Ric Jurgens, chairman of Hy-Vee Inc., and Doug Getter, executive director of the Iowa Biotechnology Association.

Radical changes in the pharmaceutical industry – among them a new wave of biologic drugs with ingredients grown and harvested from living cells – are encouraging companies to look at research and development in new ways, said Norton.

“It’s fostering a spirit of collaboration, or open innovation,” he said. “It will mean a growing network of public and private partners that share in risks and profits.”

For example, Johnson & Johnson is partnering with a Dutch biopharmaceuticals company, Crucell N.V., which is pioneering influenza-prevention drugs. On another front, Johnson & Johnson last year invested $1 billion in Elan Corp. plc, a company based in Dublin, Ireland, that is advancing research into Alzheimer’s disease medications.

Fostering relationships with universities is also important, he said. Johnson & Johnson has research relationships with 30 universities.

Jurgens, who serves on the board of the Food Marketing Institute, an international trade group that represents 26,000 food stores and 14,000 pharmacies in the United States, said the food industry is also interested in innovation. On example of his company’s innovation, he said, is itsuse of the NuVal Nutritional Scoring System, which uses a patent-pending algorithm that summarizes the nutritional quality of foods and beverages into a single number on a 1-100 scale.

Reichardt, who also chairs the Greater Des Moines Partnership this year, emphasized the ties between wellness initiatives and growth in the biosciences industry as contributors to the region’s overall economic health. This fall, Des Moines will host what he said will be a first-in-the-nation healthy living caucus.

Getter said one of the greatest threats that Iowa’s biotechnology industry currently faces is “an attack in the Legislature on business tax credits.”

“These are tools we desperately need available,” he said. “We have states around us that are taking a much more aggressive approach (by using biotechnology funds and investment tax credits).”

A review of all tax credit programs completed in January recommended that the Legislature cap and sunset a number of tax credit programs, among them a research activities credit (RAC) used extensively by biosciences companies. According to that study, the majority of tax credits claims made against corporate income tax between 2001 and 2005 were through the RAC.

A bill under consideration this session would create a tax credit for people who invest in companies performing research in regenerative medicine, an emerging field that would enable new organs to be grown for patients as an alternative to transplants from donors.

Pharmaceuticals account for just over one-third of the revenues of Johnson & Johnson, which is made up of more than 250 operating companies employing 115,000 people internationally. The company expects to announce 11 new drug filings between now and 2013, in areas ranging from Alzheimer’s disease and influenza treatments to a cure for HIV, Norton said.

Norton said four key elements that Johnson & Johnson looks for in partners are organizations that:

• have a passion for addressing unmet medical needs;

• are interested in opportunities that improve wellness and prevention;

• have the best science, technology and expertise; and

• align with Johnson & Johnson’s values of putting people first.

“We are actively looking outside our own walls for these things all the time,” he said. “We are not so much concerned about an organization’s location as we are with its scientific capabilities.”