As Pfizer's pursuit of AstraZeneca provokes uproar, another big U.S. healthcare group is taking a much quieter path into the heart of UK bioscience from an inconspicuous office off London's Oxford Street.

Johnson & Johnson's life science "innovation centre", which opened a year ago, represents a different approach to drug development based on building networks and scouting for small deals, rather than mega-merger consolidation.

Its team of two dozen scientists-cum-dealmakers, operating in the shadow of the Debenhams department store, struck 16 agreements last year for promising new treatments from universities and biotech companies in Britain and across Europe.

Rival drugmakers are also putting an increased emphasis on doing external deals for early-stage science, but J&J has gone further than most in decentralizing the decision-making process. It has set up similar talent-spotting innovation offices in Shanghai, Boston and Menlo Park, California, in the past 12 months.

"Other companies have two or three scouts in certain countries, but they need to call head office to get a decision, which means going to one committee and then another," said Patrick Verheyen, who heads up J&J's innovation operation in London.

His team, by contrast, have autonomy to strike deals and see projects right through until the "proof of concept" stage of clinical testing.

For many in the pharmaceutical industry, this outward-looking approach represents the future, because tapping into external science is vital if large corporations are to keep up with fast-moving developments in basic science and biotechnology.

And that leaves some analysts wondering whether Pfizer's $106 billion attempt to buy AstraZeneca - a move rejected by the British firm - is actually focused on better drug discovery or really all about tax and cost savings, as many critics charge.

"Pharma companies need to spend fewer biodollars internally and externalize more, yet Pfizer seem to be arguing they can succeed by pooling more intellectual capital in-house," said Navid Malik, head of life sciences research at Cenkos Securities.

ONE PLUS ONE EQUALS LESS THAN TWO

AstraZeneca, for its part, says the notion that smashing together two Big Pharma research departments leads to improved productivity has been debunked by past large-scale mergers in the sector.

"When you bring two huge organizations together, our industry tells us that it is hugely disruptive in terms of site closures, role closures," Mene Pangalos, the British group's head of early drug development, told a parliamentary panel on Wednesday. "Overall, one plus one doesn't equal two - one plus one equals one point something."

Still, the situation is not black and white.

Pfizer itself also does early-stage research deals - it struck a tie-up with UK universities in rare diseases just last week - and J&J has not shied away from some big acquisitions, with its medical devices unit buying Swiss-based Synthes for $20 billion in 2012.

But J&J's business development work in pharmaceuticals is primarily focused these days on acquiring individual experimental medicines, whether at an early or late stage of testing. As a result, about half of J&J's drug pipeline now comes from outside the company, against an industry average of around a third.

Interestingly, AstraZeneca also has a large proportion of experimental drugs that were invented externally, following a deal-making splurge by the company in the past few years, which was designed to plug a gap left by patent expiries and a run of in-house pipeline failures.

With his small team in London - plus satellite partnering offices in Cambridge, Oxford, Manchester and Cardiff - Verheyen knows his operation is just one cog in the larger J&J research and development machine, which has interests spanning drugs, medical devices and consumer health products.

But after years working on mergers and acquisitions within the U.S. group's pharmaceuticals division, he sees a clear rebalancing of the R&D model across J&J and the wider industry.

"There is a shift to external research, absolutely. Most of the innovation is happening outside the walls of our organization," he said.

"We as taxpayers fund a lot of academic research, so if we can help to make something from that academic research and help bring products closer to market then that is good for everybody."

(Reporting by Ben Hirschler; Editing by Will Waterman)