In preparation for the "ILSI-Biomed Israel 2010" conference, we went to hear what Ruthi Alon, chairman of the organizing committee, senior partner in the Pitango venture capital fund, and chairman of the Life Sciences Industry Association in Israel, had to say about the impact of the recession on the industry, the advantages and disadvantages of The Israeli companies, the strengths, the government fund and the upcoming conference. "I am very proud of the Israeli industry," she says
The health reform in the USA, regulations in emerging countries (China, India, Russia and Brazil) and the effects of the economic crisis are among the factors that will affect the success of companies in the field of biotechnology and pharmaceuticals in the years to come. This is what Ruthi Alon, the senior partner in the Pitango venture capital fund responsible for the field of life sciences, says in an interview for a special supplement of Haaretz newspaper and the science website. Alon serves as the chair of the Israel Life Sciences Industry Association, which covers approximately 750 companies, and for the past three years she has served as co-chair, along with Yisrael Makov, former CEO of Teva, of the "ILSI-Biomed Israel 2010" week, the event The annual center of the life sciences industry in Israel.
According to Alon, "ILSI-Biomed Israel 2010", which will be held on June 14-16 in Tel Aviv, will host more guests from abroad and at higher levels this year than in previous years. "As a small country where the local market is limited, we are affected by global trends and therefore the Biomed conference, which has already gained a global brand as a place where industry executives come to look for innovations, will also help Israeli companies learn what are the best ways to help them succeed in the market."
Alon says that against the background of the recovery in the global markets and the boom enjoyed by the life sciences industry, the event, which is now considered the largest life sciences meeting outside the US, will emphasize the business-practical aspects of one of the most advanced and successful industries in Israel today. This year the emphasis will be placed especially on the markets of cardiology, vaccines, oncology, "cell therapy", personal medicines, and metabolic diseases. The conference, which will connect science, technology and industry, will be accompanied by an exhibition that will include the innovations of biotechnology and medical devices. Following the tradition of the past years, this year the event will also give a central stage and exposure to about 60 Israeli start-up companies.
Alon estimates that among the approximately 7000 expected participants - CEOs and executives of biopharma and medical device companies, scientists and researchers, entrepreneurs, public opinion makers in the field, venture capital fund managers and private investors - there will also be over 1,000 guests from abroad. The assessment is based on the data of 2009, a relatively difficult year for international conferences, in which approximately 6000 people participated in the event and held over 2500 one-on-one meetings, including approximately 800 visitors from 35 countries. "We see Biomed Week as an opportunity to meet, renew connections, create new ones, do business and learn from the big names about the future of the industry," says Alon. "In addition to the lecture courses, we will hold several hour-long seminars in various fields with the leaders in their fields from the global industry, when we will certainly also involve Israelis, since we too have something to offer and say. We even try to promote the young companies at the event. We have opened a special area in the exhibition for them, at lower costs so that they can present the new products and we certainly hope that this will be a strong source of attraction at the conference. A lot of multinational companies ask us for help to announce the arrival of Israeli companies in the hope that there will be an opportunity to meet and get to know each other and maybe also in the future to create collaborations and investments."
Interim: Obama's reform
According to Alon, even if it is difficult to know what the consequences of the reform brought about by the American president in health insurance will be, because on the one hand millions more people will join the system and they will be able to purchase prescription drugs, on the other hand cuts are expected in other parts of the system such as Medicare (the insurance for adults aged 65 and over) or In the number of tests that each insured person can do, so it is possible that this is not an actual increase and that companies will be affected by this for both parties, but it is clear that there will be some kind of effect because the American health care market still accounts for 60% of all health spending in the world.
There are also changes outside the US. In the large emerging countries - China, India, Russia and Brazil, the authorities are beginning to put order in the health sector and increase regulations in order to raise the quality of medical services. Now the companies have to do more clinical trials, in more medical centers before they get approval from the relevant authorities in each country.
"All these issues affect every company both in the field of medical devices and certainly in the field of pharmaceuticals. Now the companies are required to spend higher sums of money to reach the final result - that is, an issue or sale. Although it should be noted that a long and winding road awaits all start-up companies in these fields, not only companies from Israel. Our job is to help Israeli companies reach the finish line in the best possible way."
According to Alon, the regulatory bodies in Israel have the possibility to help. China for example is willing to give a permit to those who have a permit in the country of origin. However, many Israeli companies do not manufacture their products in Israel and prefer to issue approvals and conduct clinical trials in Europe.
How is the impact of the recession felt on the industry?
"The large companies that have sales permits were less affected by the recession, because they continued to consume their products, although the hospitals, which are major customers of the biopharma and medical device companies, were also asked to cut back and, among other things, postponed surgeries and other non-urgent medical activities."
On the other hand, Alon explains that the start-up companies were harmed as a result of a financial chain process that collapsed. The start-up companies are mainly financed by venture capital funds, which build on an exit from them - that is, an offering, or a purchase by a larger company. Since there were not enough exits, the flow of money entering the funds was drastically reduced. When a fund knows that it is difficult for it to raise new funds, the instinctive step is to keep the funds that have already been raised for the existing portfolio companies and invest less in new companies. "Fortunately, it seems that recently the markets are opening up again and the various funds in the world will also see funds coming back in and will be able to continue investing."
Intermediate: Government fund
In 2009, after requests from the industry for years, and in light of the recession that damaged the companies' ability to recruit, it was announced that the government would open a government fund that would leverage NIS 250 million for the benefit of the biotech industry. The Director General of the Ministry of Finance, Haim Shani, announced last December that the government fund in question is intended to be built from the government's initial capital while expecting external funds to join it. A tender has not yet been held to determine the person who will manage the fund, who will probably come from the venture capital industry, and will bring with him corresponding money.
Alon is happy about the move and additionally proposes to establish a similar fund for the field of medical equipment - a field not covered by the current fund. "We welcome the government assistance to the pharmaceutical sector. He is very important. However, the field of medical devices should also be helped. In the previous years, venture capital funds and other investors invested in many companies in the field of medical devices, and indeed quite a few companies were subsequently sold to the giants of the industry, and the funds exited them. Recently there has been a change in the equation, when the number of companies able to acquire young companies is very small, and as a result it has become a buyer's market where the companies can present to the young companies demands that were not presented before.
"If until recently, when an entrepreneur came to a large company with good technology, there was a high probability that his company would be acquired at the beginning, then today, companies that come here are not looking for simple technologies but for uniqueness, something that Israel is good at. On the other hand, when the technology is unique, the regulatory requirements that apply to it are heavier and the company's costs increase. Today, in order to reach maturity and obtain regulatory approvals in the US and Europe, companies are required to spend amounts that cannot be obtained in Israel. Unlike in the field of computing, very few foreign funds cooperate with Israeli funds in investments in medical equipment and pharmaceutical companies."
In light of all these changes, Alon recommends to the Chief Scientist to also support the field of medical devices, whether through the establishment of a fund similar to that of biopharma or through other means to enable this sector to deal with the obstacles as well.
Is the success rate of Israeli biomed companies, expressed in IPOs and acquisitions, good relative to investments?
"In the period between 1996 and 2003, about a billion dollars were invested in 320 companies in the life sciences. As a result of this investment, and because investment in pharmaceutical companies in particular matures after many years, it is useful to measure the results of these investments in a later period. Indeed, as a result of the funds invested before 2003, exits were made in these years to companies in the field of life sciences in the amounts of 2.3-2.4 billion, but for a total of 19 companies. That is, about 6%. The industry as a whole had a multiplier of 2.3 on the money invested just because of those six percent, if in the next five years there will be at least 5% of the original 320 companies that will sell or go to the stock market, it will be a multiplier of 4.6 on the money invested on about 11% of the companies and this An exceptional result. As an industry we are very effective and very productive and I am very proud of the Israeli industry. I myself have had successful investments in companies such as Optamol, Ventor, Disoctec, Colbert and we have companies that have entered the market such as Dipharm and Bioline. We also sold half of Biocontrol to AMS."
What are the advantages and disadvantages of the Israeli biomed market: where are its strengths and weaknesses, in your opinion, and how can they be exploited?
"The Israeli market is a very young market, full of energy that brings technological developments at a very high level. We have the evidence of patents behind us and in this respect we are among the leaders in the world, however the main problem is that the system is not funded properly and that there is a lack of infrastructure such as a law regulating clinical trials including the capacity of such trials, restrictions on animal trials and from another point of view - the managements are not experienced enough. But in all these areas we are improving. Other problems are that the equivalent of the FDA in Israel is active in a more limited way. This makes it difficult for the Israeli companies to move forward in an orderly manner because in Israel it is difficult to get approvals for clinical trials at the beginning of the journey, so you have to travel to other countries. In the framed article, the Europeans also ask whether clinical trials were done in the company's country of origin, and the Israelis always have no answers. There is a willingness on the part of all parties to improve the situation and progress on all these fronts should be made so that all the infrastructures will be coordinated and it will be possible to ease the difficult effort of bringing a company in the medical field from A and Z. In any case, it's a long and expensive road, and it's better to have as few obstacles as possible on the way."
What does the future of the biomed field look like in the State of Israel, according to your assessment, and how does it fit into the international market?
"I am optimistic about the future of the field. We have exceptional abilities here. When you look at the situation today compared to the situation about a decade ago, it is impossible to compare, the market has matured and matured all along and this will allow us to go far. The world sees us as a significant source of innovation, and if we know how to use this figure in an orderly manner and the government fund for biopharma is a good example of this, good things can happen. However, no one should deceive themselves that this is a sailing with a tailwind. Now only that they do a similar thing in the field of medical devices as well."
If you had to name a number of points that are a highlight of your career, which moments would you choose?
"When I worked on Wall Street I was considered a very good analyst. In Israel I have investments in which I was very clearly successful together with Pitango. Each of these companies is important to me personally, important to the foundation and important to the State of Israel in general."
What elements do you think a startup should have in order for it to be worthy of Pitango's investment? What is the winning formula?
"In my opinion, there are no winning formulas. It is very important to us that the product has a large potential market, that there is good patent protection because this is one of the most important things in our field, that there is a very clear strategy from a regulatory point of view and that there is good management. There is a triangle between the investors, the entrepreneurs and the company, and the better the relationship in this triangle, the easier the path to success."
What recommendations do you have for people at the beginning of their life sciences career who want to make a mark?
"An entrepreneur in the field of life sciences must first of all have a long breath, which in my opinion is very important in this field to understand. He also needs to recognize that he does not know everything and the more he asks for advice and help from those who have already gone through a similar path, or who have a very high level of knowledge, the higher your chances of falling short will be. One way is to establish an advisory board of experts to help overcome the obstacles. As a rule, most technological problems can be solved. The entrepreneur needs to understand what he is doing, and most importantly be proud that he is bringing a cure to the world - that in itself is a very strong feeling."
What is going to happen at the Biomed conference this year? What do you think will make the most waves?
"What always causes the big waves is the visitors' understanding that Israel is an excellent center for technologies and that there is a vibrant, alive and energetic industry here, and that people work here efficiently and effectively with much smaller amounts of money, and then everyone who comes to the conference and meets with entrepreneurs finds what they are looking for . The very increase in the number of visitors indicates that people understand that they should come and search here. Each conference brings with it a greater momentum from year to year and this is what I see as success."
