The purpose of the funds is to promote and encourage the growth of the biopharma industry in Israel.
It is estimated that the funds will raise hundreds of millions of dollars in addition to the government's investment of 80 million dollars.
The Minister of Trade and Industry, Binyamin (Fouad) Ben Eliezer, welcomed the publication of the tender and emphasized the great importance of the fund for strengthening a knowledge-intensive industry, in which Israel has a unique advantage in the world thanks to the human capital invested in it.
The Chief Scientist at the Ministry of Science and Technology, Dr. Eli Ofer: "Among the life sciences industries in Israel, the biopharma field is considered particularly rich in knowledge but also high in risk. Developing new drugs, for example, requires huge capital, and it also takes a long time - up to 20 years."
The Office of the Chief Scientist at the Ministry of Science and Technology and the Ministry of Finance published an international tender for the selection of management bodies for the establishment of investment funds in the field of life sciences. The government will invest in the funds 80 million dollars as a limited partner, in addition to providing significant financial incentives to the limited partners who will invest in these funds.
The goal of the fund is to raise capital for the Israeli biotech industry, which, according to the assessment of professional sources, has extensive potential but is currently suffering from a market failure that makes it difficult for it to raise capital and develop a sustainable industry. Another goal of the fund is to use it to import to Israel international management knowledge and experience in the field of biopharma, and to create an infrastructure for the establishment of an investment industry in the industry. The government believes that the establishment of the funds will lead to the establishment and growth of the biopharma industry, which is expected to affect the entire economy in several aspects: increasing GDP, increasing employment rates, and preventing a "brain drain" abroad.
In the first phase, first-class professional management bodies in Israel and the world that meet the threshold conditions will be selected. In the second stage, a tender will be held to select the management groups that will receive government funding, based on the amount of private money that the managers will be able to raise for the fund, that is, what will be the leverage ratio of the capital invested by the government in the funds by private capital. Government officials assume that it will be possible to reach a leverage of at least three times, so that 80 million dollars of government investment will be translated into biotech funds with a total capital of hundreds of millions of dollars. The capital for the funds is supposed to be raised in Israel and abroad, a move which is expected to be led by the cooperation of managers from abroad and Israeli managers.
The government's partnership in the funds will be in the form of an "inferior limited partner", which absorbs the loss first and takes only a limited part of the profit. In doing so, the state will increase the profit of the additional limited partners and protect them in the event of a loss. The fear of loss constitutes a significant investment barrier, especially among institutional investors from Israel, who tend to invest to a low extent in venture capital funds in general, and in funds in the biomed field in particular. Furthermore, in order to make the fund attractive also to potential managers, a number of mechanisms have been established for the benefit of the managers.
The funds will undertake to invest a minimum critical amount, defined in advance, in companies in the biopharma sector. Beyond this amount, the fund will be able to invest in companies in other areas of the life sciences such as medical devices and diagnostics and thus be able to expand its portfolio companies. The life of the funds will be at least 10 years, with the possibility of extension (with the approval of the limited partners) when the duration of the investment period is 5 years.
The Minister of Trade and Industry, Binyamin Ben Eliezer, welcomed the publication of the tender and emphasized the great importance of the fund for strengthening a knowledge-intensive industry, in which Israel has a unique advantage in the world thanks to the human capital invested in it. The fund will result in the preservation of this capital in Israel, and will result in an increase in the employment rate, in particular among academics who have graduated in the life sciences. In addition, the minister noted that since the life sciences industries are export-oriented industries, the fund's activity will contribute, among other things, to an improvement in Israel's balance of payments, to attracting additional investments in the Israeli industry, as well as to the continued functioning of the biotechnology industry as a growth engine in the world, when in the world, this industry has already grown Many years at a double-digit rate.
The chief scientist, Dr. Eli Ofer, pointed out that among the life sciences industries in Israel, the biopharma field is considered particularly rich in knowledge but also high in risk. Developing new drugs, for example, requires huge capital, and it also takes a long time - up to 20 years. Because of this, biopharma companies in Israel have a very difficult time raising the capital they need, and the field suffers from a massive brain drain. The move to establish the funds is intended to correct this market failure, and to prevent its continuation by trying to build a biotech investment industry that will finance itself.
You can view the invitation to submit bids in the tender on the websites below:
www.moital.gov.il/madan/biotechfund, www.mof.gov.il - under the "Tenders" section.
