Ahead of ILSI-Biomed Israel Week 2011, the writer examines what happened in the very hot field of life sciences in Israel during the past year, and what is expected next. For sure, it's going to be interesting
By: Nahum Donitza*
* The author is the CEO of "Donitza Communications-DMC", a public relations office specializing in the field of biotechnology and medical devices www.donitza.co.il
The figures published by the accounting firm BDO Ziv Haft at the beginning of 2011 put a smile on quite a few lips. A smile of satisfaction. From a review of transaction data carried out by the firm, it became clear that for the first time, in 2011, more transactions will take place in the field of life sciences than in the field of IT. The basis for the assessment: in the first two months of 2011, about 50% of the total transactions (hirings and exits) were in life sciences companies, which reflects a continuation of the trend of an increase in the number of transactions in this field in 2009 and 2010. BDO believes that the trend will continue.
According to the firm, if until today the IT companies have enjoyed the unwavering attention of investors and most of the capital invested in the high-tech sector in Israel has flowed into software, communication and semiconductor companies, this year, 2011, precisely the field of biomeds will provide a lot of action.
According to the analysis, the main reason for this is that investors are looking for small transactions and not huge transactions of tens of millions of dollars: "Investors recognized the potential of the biomed field, especially in the early development stages that allow small investments with high risk, but also with a higher return potential." According to him, investments in life sciences suit the taste of Israeli investors," said CPA Yaniv Cohen, partner and director of the high-tech cluster at BDO Ziv Haft.
According to him, in the field of life sciences, most of the transactions were IPOs by the companies on the Stock Exchange, and especially on the Tel Aviv Stock Exchange. And what's more: if in the IT companies most of the transactions are conducted at the stage when the company already has sales, in the life sciences companies the transactions are divided almost equally between companies whose first revenues are and those that are still in the research and development phase. The examination shows that the investors in the life sciences industry place an emphasis on identifying the company's potential and striving for innovation, even if this will not be reflected in revenues immediately.
Life sciences attracted most of the capital
The wave of positive numbers was joined by the research firm IVC and the accounting firm KPMG Somech Chaikin, according to their data, in the slow 2010 Israeli high-tech managed to raise 1.26 billion dollars, 13% more than in 2009 (when the local funds are only responsible for 371 million dollars, which are only 30% of the volume of recruitments). The field of life sciences attracted most of the capital - 28% of the total recruitments.
"Israel is a center of excellence in the life sciences sector. The medical equipment sub-sector was the most active sector in 2010, both in the amount of capital raised and in the number of companies that were able to raise," says Ofer Sela, a partner in KPMG's technology division.
The IVC research company that summarized the exits for 2010 of Israeli high-tech companies stated that these totaled $2.2 billion in 2010. The scope of mergers and acquisitions (M&A) of Israeli high-tech companies and companies related to Israel was estimated at $2.04 billion, a decrease of 20 percent from 2.56 billion dollars in 2009. At the same time, only 127 million dollars were raised during the year through ten initial public offerings (IPOs) - a considerable improvement compared to one offering in the amount of 22 million dollars in 2009, and compared to 2008, in which no First issues.
Kobi Shimana, CEO of IVC, said that the outstanding finding in the summary of the past year is that 70 percent of the initial public offerings of Israeli hi-tech companies (7 companies) were raised on the Tel Aviv Stock Exchange by companies from the life sciences field, which raised 52 million dollars.
And in general, the combination of the words "biomed/stock exchange" is heard in this arena more and more often. Since the beginning of 2009, the companies belonging to the industry have reported progress in the clinical stages, some have successfully completed the trials and brought a new approved product to the market, more companies have entered the final stage of the process, more companies have signed commercialization agreements or distribution agreements for their products. hot. Nathalie Gottlieb, the pharma analyst at IBI, said not long ago that despite the fears of uncertainty in the markets, there is room to invest in Biomed shares. "This should be done as part of a decentralized investment portfolio, with diversified investments in the field of life sciences, while choosing the recommended stocks with the lowest risk and the highest chance from the basket of life sciences stocks." If so, she emphasizes that it is better not to forget that the risk in the biomed field is high and the dream is still far away, and failure sometimes means the entire investment being wiped out."
Paid reviews
The end of 2010 found the biomed companies traded in Tel Aviv opening trading on Nasdaq with the CEO of the Israel Stock Exchange, on the occasion of a conference organized by the stock exchange in Tel Aviv, the purpose of which is to connect the companies and foreign investors in Nasdaq. The meeting was attended by investors from the leading institutions in the USA in the biomed field as well as from the Israeli side. The companies that took part in the conference included Biotechnology Industries, Kamada, Protelix, Avogen, Compuogen, Mazor, D-Medical, Itamar Medical, Bioline, Hadasit-Bio Holdings, Prolor, Afosense, D-Pharm and Brainsway (14 of the 17 which the stock exchange turned to, which according to their market value are the largest companies in the biomed sector).
And if that's not enough, the Tel Aviv Stock Exchange has announced the recruitment of an international analysis company that will conduct paid reviews for the biomed companies traded, if and when they have a critical mass. The move is part of the exchange's plan to create a comparative advantage in the biomed sector, hoping to attract money and international companies. Esther Levanon, CEO of the stock exchange, said that the project is still brewing, and in the meantime, the run is a course for finance people who are interested in getting a background in evaluating biomed companies. At the same time, the stock exchange began to work to bring foreign investors to the Israeli biomed companies. Lebanon's vision: to turn the stock exchange in Tel Aviv into a trading center for high-tech companies from all over the world, first in the biomed field and later in the entire technological field. "Over 50 biomed companies are traded in Israel, which is unprecedented outside of the US," said Lebanon. AIM already has a few companies, the Nasdaq stock exchange in Scandinavia also has a few companies, and there is us. Our goal is to bring in foreign investors, and then the stock market will be attractive enough."
In the meantime, until Lebanon's vision comes true, there is no disagreement that 2010 was a year of recovery for the economy and also for the biomed field. This was celebrated in the local stock exchange with new issuances and mergers of companies into listed skeletons (although, at the same time, relatively small recruitments of private companies took place).
For the biomed sector, 2010 opened with four IPOs - Intech, Proteologics, Opusense and Insulin. In 2010, 10 companies entered the stock exchange in the course of a merger to Shellad Bursaai and were joined by the successes of Protlix, Kamada and Mediwind. 3 other companies from the field, traded in the USA - Protlix, Prolor and Pluristem even made a double registration in Israel.
A small problem: none of the companies in the field of medical devices, which were issued in recent years, found their way towards a large exit (although outside the stock market they recorded not bad exits, see the case of Madingo which was sold to Medtronic for 250 million dollars).
The situation from the stock market side looks even less encouraging if you take into account the dozens of prospectus drafts of biomed companies that considered the possibility of going public as early as 2010 - and did not take the final step. Since the beginning of 2011, only four initial public offerings have been completed on the Tel Aviv Stock Exchange: Glycominds, Redhill Biopharma, Rosetta Green and iSure. Two companies - Trig and Guardia - reached the prospectus stage, but did not finally issue. Only a few days ago, the Capital Point Group company Neuroderm, which develops drugs that are delivered through the skin, also joined the list, and decided not to go public on the stock exchange due to the market situation. The estimates are that one of the reasons for the cancellations in the Biomed issuances is the performance of the Biomed index - which since its launch has dropped by 23%.
Ido Tzvikel, consultant relations manager at Meitav Investment House: "2010 was supposed to be the breakthrough year for biomed companies in the Ahad Ha'am Stock Exchange. There was a feeling that a market for companies in the life sciences field had indeed been created in the Tel Aviv Stock Exchange, which would maintain a lively trading cycle and arouse interest from companies around the world, but the euphoria was short-term. At the end of 2010, the Tel Aviv Biomed Index was a battered index and the investors in the biomed sector did not get satisfaction from their investment."
In explaining how an index that symbolized the future of the local stock exchange only a year ago, which brought together innovative and leading companies in their field, is received with such coldness by the Israeli investor, Zvikel provides several answers, starting with the inability of the companies in the sector to show profitability in the transition from the stage of dreams to the stage of reality to the correction of the market for gains The sharpness of 2009. "The Israeli investor suffers from impatience, and is looking for a quick and easy profit. For example, therefore the gas stocks are more enchanting to him than the biomed stocks: there, either there is gas or there is not - simple and fast."
Despite the difficult year, says Tzvikel, the Israeli biomed index is the future. In 2011 it can already be seen that its companies are more mature, more experienced and closer to achieving the results. The investors will return to invest in the industry - and maybe, for a change, they will also be patient and wait for the results."
Where does the money come from?
The big problem remains: where does the money come from to finance medical equipment? Salvation was supposed to come from the new funds, the same venture that the Treasury and the TMT are talking about. At the beginning of 2011, two entities remained in the picture in the race to receive government aid to establish a fund to invest in the field of biomed - Orbimed and Medica. At the beginning of April the picture changed: the Ministry of Finance and the Ministry of Taxation signed an agreement to establish a fund with Orbimed Global.
The Biomed funds project (launched two years ago) is intended to encourage significant investments in drug development companies in particular, and biomed companies in general. The goal was to prevent the sale of young companies for too low amounts, and to bring to Israel leading investors from around the world. It is estimated that an investment of hundreds of millions of dollars by the state in the field of biomed, will create the critical mass and thus the Israeli biomed industry will be able to develop and be competitive in the world even without additional government support. The state agreed to invest up to 300 million shekels in support of private investors and to give one shekel for every three shekels brought in by a private investor. In April, the Ministry of Finance and the Ministry of Taxation signed an agreement to establish a fund with Orbimed Global, the world's largest investment body in the field of life sciences, which manages investments to the extent of over 5 billion dollars in companies dealing in the fields of life sciences. The scope of the Israeli fund's activity will be approximately 200 million dollars in the initial phase and it may increase later.
The fund will invest in the field of life sciences, with a significant portion of the investments directed to the field of biopharma, which has been identified by the state as a field with excellent infrastructure in Israel, which does not reach exhaustion. The fund that will be established will be among the units in Israel that will specialize in the field of biopharma.
The Orbimed Group was found qualified to submit a proposal for the establishment of the fund after meeting the threshold conditions set for it, and in the second stage it was required to raise an amount of at least 76 million dollars. Orbimed managed to raise about 160 million dollars from the private market, more than twice the minimum required, a remarkable achievement, especially in light of the great difficulty in raising venture capital these days. This fundraising amount leverages the government's investment to the maximum.
As part of the agreement, the state will invest about 40 million dollars in the Israeli Orbimed. The total amount that the fund will manage, consisting of Orbimed's fundraising and the state's investment, makes it one of the largest venture capital funds in the Israeli industry. The entry of Orbimed Global into Israel is expected to increase international investments in the life sciences industry in Israel by approximately 200 million dollars, through co-investment with foreign funds.
Following the winning of the tender, Orbimed Global opened a representative office in Israel (led by Dr. Nissim Darvish, Erez Himovitch and Anat Nashitz). Dr. Yuval Steinitz, Minister of Finance, said immediately after the signing that the fund will invest in all stages of the companies' lives in the various fields and that this is a great success - indicating the government's ability to identify failure, bring a solution to the table and create cooperation with the private market. Shalom Simhon, Minister of the Ministry of Science and Technology, noted that "the biotech fund established jointly by the Treasury and the Science and Technology Ministry is a clear example of the government's trust in industrial R&D, which it sees as one of the main growth engines of the economy."
Dr. Nissim Darvish, managing partner at Orbimed Israel, stated that the fund will invest in the field of life sciences in a wide variety of topics such as: medical equipment, biotech, diagnostics and more. The fund will invest in all life stages of the companies in the various fields, starting with the lime stage. According to Jonathan Silverstein, managing partner at Orbimed Global, the decision to operate in Israel stems from the recognition of Israel's high potential in the field of life sciences in the coming years. "In the last two years, we have seen significant momentum in this field in Israel and a significant increase in the number of companies that are in various stages of clinical trials. Urbimed examined government programs in other countries in the world and decided that the combination of the Israeli government's programs together with the potential of the industry in Israel was the most attractive."
The coming months, it seems, will pose quite a few crossroads for the Israeli biomed companies.
In recent years, the industry recorded magnificent exits that exceeded most exits in the high-tech industry, but in 2010 only one exit was recorded - the sale of Madingo to the Roche company for approximately 250 million dollars.
Have a good year
According to Ruthi Alon, a senior partner in the Pitango venture capital fund and the chair of the Israel Life Sciences Association (ILSI), who serves this year as the chair of the organizing committee of the 2011 ILSI-Biomed Israel conference, she is optimistic. "The life sciences industry is at the beginning of a very good year" she says ahead of the conference that will celebrate ten years of its existence this year (and has become in the past decade one of the largest international conferences held in the world, encompassing the fields of pharma, medical devices and biotechnology).
According to Alon, the difficult years that have passed the industry are about to end. "This year we will see many more companies that will enter into collaborations with Israeli companies, such companies are looking for companies that will refresh their stock of medicines and future medical devices." As an example, she cites the upcoming conference: "The starting point that guided us was to touch on entrepreneurship and innovation combined with the business/practical/technological aspects of one of the most advanced and successful industries in Israel today. For me, the conference is a meeting point for both industry and academia from Israel and the entire world. The international guests come to hear and witness the innovation up close and to experience the same spirit of entrepreneurship that blows at the back of the Israeli life sciences industry."
Among the main speakers will be people such as the American investor and philanthropist Dr. Alfred Mann, founder of companies in the field of biomed and investor in many companies, including N.A.S.S. Israeli, and founded Amit (Alfred Mann Institute at the Technion, AMIT), the Technion's technology commercialization company. Mann will present to the audience his insights on entrepreneurship in general, and Israel in particular. Another guest is Prof. Yossi Schlesinger, formerly a member of the Weizmann Institute and currently the chairman of the department of pharmacology at the Yale University School of Medicine and the founder of the companies Sugen (SUGEN), Flexicon and Kolten in the United States, all successful companies. Schlesinger will present the angle of a researcher and entrepreneur who was successful in Israel and abroad. Prof. Regina Hertzlinger from Harvard University's Business School will examine medicine from the point of view of the consumer, who has become more important in today's world. Other guests: Francois Mizonrouge, of Evercore Partners, Dr. Steve Australa, of Medtronic, Mike Musallam of Edwards Lifesciences, Dr. Gary Neal, of Johanson et Johanson, Barry Green of Alnylam Pharmaceuticals And this is only part of our list. There are many more good ones, from Israel and abroad, that it would certainly be interesting to come and hear them, but, beyond that, to meet with them... It should be remembered that there will be about 1,000 guests from abroad, alongside over five thousand participants from the top industry in Israel in the field of pharmaceuticals and medical devices, Scientists from industry and academia, entrepreneurs, investors, managers of venture capital funds and more.
Alon says that there will also be a symposium on cardiovascular issues, advanced seminars on biosimilars and biological platforms, neuroscience, uses of technology in the promotion of preventive medicine, and current issues in the economic field and the issue of the future of the health care system will be raised.
Moshe Lilos, CEO of Kens Erokot, says that on the occasion of the tenth anniversary of the conference, Kens Erokot and the people of ILSI - the Israeli Life Sciences Industry Association, decided to use the success of a week at Yomed as a lever to show the wider world the abundance of entrepreneurs and ideas that are growing in Israel alongside the old and well-known companies More.
For the benefit of the theme, a magnificent CEO's club sponsored by "fellow attorney Polk Matlon" will be set up on the exhibition grounds at the Dan Panorama Hotel, where senior managers and entrepreneurs from the Israeli industry will be able to meet one-on-one with the world's leading players in the field and present to them "why they should do business with And in Israel." The club will be a meeting point for the foreigners who come to the event and will allow the Israeli companies to find what they are looking for without running around and donating among the 6000 visitors.
"The idea of establishing the club is to present to the guests from abroad one cohesive industry and to prove to the world that the biomed industry in Israel is kicking and attractive. The platform we created especially for the personal meetings will allow our entrepreneurs, including the young and less well-known, to meet the major tone-setters in the global economy - a one-on-one meeting in a less formal and more relaxed atmosphere of doing business. We want all the international players in the biomed industry to be able to get a close impression of all the very impressive activity happening in Israel in the field."
Entry to the complex will be made with a personal card. Each of the accepted companies will also receive a stage in the main conference program, in which the conference participants will be able to present themselves (sponsored by "Bio Jerusalem"). In addition, private meeting rooms equipped with the best technological innovations will be available to the companies.
The scientist supports
A breath of fresh air is also blowing from the "government": from summaries prepared by the Office of the Chief Scientist, ahead of the "ILSI-Biomed Israel 2011" week, it appears that during the entire year 2010, the Office of the Scientist approved support grants amounting to NIS 430 million in projects in the field of life sciences. In the field of pharmaceuticals, grants amounting to NIS 49 million were approved; In the field of biotechnology - NIS 173 million, and in the field of medical equipment, grants amounting to NIS 209 million were approved. In total, the chief scientist's research committee discussed 338 projects submitted by 193 companies, of which 265 projects were approved (with a total research and development budget of NIS 701 million). These data indicate a decrease of 10.5% in reference to activity and grants given in 2009, which was the record year in the past decade for R&D grants given to the life sciences industries - NIS 480 million. However, in the biotechnology industry, an increase of NIS 4 million was recorded in relation to the grants given to companies in this industry in 2009. According to the data, the rate of support in recent years in the field of life sciences maintains a share that ranges from 30% (in 2007) to 28.1% (in 2010), compared to 14% in 2000 and 22% in 2003.
And another statistic: the Technology Incubator Committee, chaired by Hasson, recently approved support for six new projects to be established in incubators with a total amount of NIS 9.7 million, with four of them in the field of medical devices (among them Desense Medical, for the development of a non-invasive intracranial pressure monitor, EpiPix for the development of technology for tiny treatment invasive in juvenile scoliosis, Gerium Medical which will receive funding for the development of a non-invasive device for testing the level of bilirubin in newborns and the Yuricon company which will receive funding for the development of a device to prevent urine leakage in a minimally invasive surgical procedure). Yossi Smuller, director of the technology incubators program, even stated that in the first quarter of 2011 support was approved for 17 new ventures and that 53% of all approvals were given to ventures in the field of medical devices.
According to Avi Hasson, the chief scientist, the State of Israel has excellent centers of excellence in academia, an entrepreneurial spirit and technological capabilities in the field of life sciences, which together lead to Israel's positioning as a significant factor in the global aspect. "The uniqueness of the industry in Israel is expressed in the combination of life sciences with other fields, such as nanotechnology, smart materials and advanced electronics." According to Hasson, the Office of the Chief Scientist is committed to continuing to support and assist the life sciences sector, and gives priority to companies in this field, at all stages of development in which they are. "Thanks to this support, more companies have reached advanced stages of clinical development in recent years." In this context, the Chief Scientist mentions the recently reported win of the international Orbimed Foundation in the tender for the establishment of dedicated R&D funds for the field of life sciences. "It must be assumed that when an international company raises 160 million dollars, which is many times more than the amount required according to the terms of the tender, this indicates the great confidence that the global capital market has in the Israeli life sciences industry and the technological and commercial potential inherent in this industry for the growth of the economy."
changes changes
Another change, it is estimated, that will help the industry is the Angels Law that the Israeli government passed with the encouragement of MK Robert Ilatov. The law, which grants substantial tax benefits to private investors, is expected to strengthen the trend of angels entering young medical device companies. "The law helps people who want to invest in the field," says Alon. "Any money that comes in can contribute to the development of the industry. In the United States, the angels are responsible for a considerable part of the investments in the biomed field". According to Alon, at the end of the day there are not too many miracles and wonders: additional money is needed for the industry, especially in the field of biotechnology, so that companies can, for example, continue from the first stage of clinical trials to the second stage. The transition from a small company to a large company involves successful clinical trials and in many cases cooperation with a large company, which will help the small company to conduct itself correctly.
"For its part, the state can help establish a good and appropriate education system, by encouraging scientists who have acquired knowledge abroad to return to Israel and help young companies, by encouraging pension funds to invest in the field of biomed. Angel Law is definitely a step in the right direction. The state does take interesting steps in the field, which are important to see along the timeline."
"I hope that within a period of five years we will reach a situation where 40-50 percent of the companies we know in the industry will already be in the sales phase. Today there are not many Israeli biomed companies with significant sales figures. In the future, one should hope, several more companies will reach their destination. This is hard work for companies that stand on their own and are not part of a very large company. We have outstanding capabilities in Israel. When you look at the situation today compared to the situation about a decade ago, you can see that the market has matured and matured 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 data in an orderly manner, good things can happen.
It should also be remembered that science does not stop, new companies will emerge and advance in clinical trials and more business relationships with international companies will be created. All in all, it can be said that I am optimistic."
The heads are optimistic
Other representatives of the industry are also no longer afraid to give rosier forecasts for the coming years. Alan Crane, from the American venture capital fund Polaris, which made two investments in Israel (with an exit in Ramon Medical, which was sold to Boston Scientific for $80 million), sees Israel as a good place to look for new investments. "Israel interests us" he says at every opportunity and interview. "To date, I have seen dozens of companies in Israel, and I am also looking for companies whose entrepreneurs are Israeli, but whose main activity is in the US. They understand how to extract value from science and technology." According to Crane, the signs of the recession are still evident and overall investment has decreased, but he believes capital will return. In Israel, he says, the fund has seen mainly interesting companies in the field of medical devices, "but there are also interesting biotech and pharma companies. At biopharma we are looking for breakthrough platforms that can lead to several drugs and not just one. In medical devices, we invest in specific opportunities and simply examine the opportunity."
Positive voices also emanated not long ago from the cluster of biotechnology companies Bio-Negav, whose founders set out to raise 50 million dollars for a huge international company for the benefit of an investment fund that will finance the companies operating within the cluster. Dr. Shay Yarkoni, founder of the biomed company In-Target, which established and manages the cluster since 2009, stated that Bio-Negg was established based on the Bio-Clusters model, and that it functions as the coordinating body between all the parties located in the Negev and working in the field of biomed. Yarkoni, who also serves as chairman of the advisory committee of the Export Institute in the field of life sciences, said that four companies are already operating within the cluster, some of which develop products and the others offer services. In addition, the cluster's management signed a cooperation agreement with BioRN - a biomed cluster operating in Heidelberg, Germany (and which has agreements for collaborations with the biotechnology and pharmaceutical giants Roche and Merck and a budget of 80 million euros). Yarkoni believes that the joint activity of the cluster and the investment fund will allow the field of biotechnology to flourish in the Negev.
Attorney Daniel Markhos, a mergers and acquisitions partner at the firm Amit, Polk, Matlon & Co., which deals among other things in the field of life sciences, looks specifically at the American market, and tries to extrapolate from the analysis what is expected in the Israeli bubble market. "Many American companies - including the leading companies in the fields of biotech and life sciences - are in the process of adapting," says attorney Daniel Markhos. "First, they are still adjusting to the consequences of the global financial crisis, and especially to the severe consequences on the American economy. Second, they adapt to the economic measures taken by President Obama, such as the imposition of heavy taxes on large and medium-sized companies. In the fields of biotech and life sciences, in quite a few cases the aforementioned adaptation is manifested, among other things, in moves to lay off workers and reduce R&D budgets. These moves are intended to bring about a relative lack of the "internal" R&D activity of the large and medium-sized American companies. As a result, the need of the aforementioned companies for strategic collaborations with dynamic R&D companies - such as small Israeli companies - is increasing", says Attorney Markhos.
In the opinion of Attorney Marcus, such collaborations become over time an effective alternative for the American companies, which are looking for promising technologies and future developments, but find it difficult to produce them with their own hands. "Here is the "window of opportunity" for many young and dynamic Israeli companies, which are looking for assistance and support in order to prove - through clinical trials and expensive and long FDA processes - that their technology is not just a "dream", but should be considered "evidence-based medicine" ( EVIDENCE - BASED MEDICINE), which is expected to bring, in the end, revenues and profits.
"The types of cooperation are many and varied, and it is possible to adapt them to each specific case, according to the relevant circumstances. The common types include, among others, joint development agreements with a defined distribution of rights, general or specific LICENSING agreements (including the granting of a "thin" license for a specific field or a specific application), production agreements and distribution agreements."
Attorney Marcus says that in recent years, we have also seen quite a few cases of the acquisition of young Israeli companies in the field of biotech and life sciences - devoid of significant income - by large American companies. Sometimes, the purchase is made at a large value of the acquired company, despite being an R&D company only, without revenues and without FDA approval. Good examples of this phenomenon are the Medigad company, which was purchased by ST JUDE MEDICAL at a value of approximately 300 million dollars, and the Ventor company, which was purchased by MEDTRONIC at a value of approximately 325 million dollars.
In the opinion of Attorney Marcus, the continuation of the adaptation process of the leading American companies in the field of biotech and life sciences is expected to result in a proliferation of strategic collaborations and acquisitions of the types described above. "It can be assumed that the relative lack of free funds of the leading American companies will have a negative effect on the size of the transactions carried out, on the one hand, and will lead to an increase in the number of transactions carried out, on the other hand."
On the same level as the best companies in the world
According to Ralph Robbins, one of the forces behind the success of a number of Israeli biomed companies that have spread their wings abroad, investors always want to see the clear path to the market. "The key word is access to the market," says Robbins, who serves as director of The Virginia Israel Advisory Board (VIAB), part of the Virginia Governor's Office, dedicated to the mission of helping Israeli companies expand in the US. Robbins, is the living spirit of the "Virginia-Israel" life sciences commercialization center venture, within which 12 Israeli companies are currently operating. In nine of them, 11 million dollars have been invested to date and now they are organizing a second fundraising. "The financing in this case is used as Gap Funding, says Robbins, which provides the Israeli companies with an umbrella that provides a support system and specialized guidance from professionals in the field. "The goal is that the partners in the venture will find companies that are ready for commercialization, with a proven concept and will go hand in hand with them until the final commercialization in the American market." And he is definitely optimistic: "The dollar will stabilize, business will improve (don't forget we are in the run-up to the US elections) and in my estimation, a number of significant breakthroughs are expected in the biomed field in the next year or two."
Dr. Lior Carmon, director of Vaxil BioTherapeutics, behind which he has registered patents for vaccines against human tumors, worked in biotechnology in general, managed several biotechnology companies, and founded his own biotechnology company, says that from his perspective, he estimates that the fields that are gaining momentum in Israeli biomed They are micro RNA, and RNAi, a technology that blocks protein synthesis. "Our field, therapeutic vaccines, has gained a lot of momentum in the last year," he says. "A product that was approved in recent months - an antibody that helps the immune system and treats melanoma - made a lot of noise in the field of vaccines and immunotherapy. The field of stem cells is getting stronger. The Israelis are strong internationally, both in stem cells, and in general in the various biotech fields. In the field of vaccines, there are not many companies, but the ones that exist are very serious companies that do not fall from abroad, and are on the same level as the best companies in the world."
According to Dr. Carmon, the crisis in the field of biotech, derived from the global crisis, is indeed fading, but slowly. "It is very difficult to raise funds. In the US it is even more difficult to get IPOs than in Israel, but they are slowly recovering and the situation is already positive. By and large, following the economic situation, the trend is for companies to try to maximize their value - only with as little investment as possible. You can't do a lot of R&D and invest a lot of resources in initial technologies, because you have to show the investors concrete things. That is, companies should achieve as many things as possible, with a minimum financial investment. Most companies focus on products that will increase the company's value, rather than promoting research and development," says Dr. Carmon.
Zero research budgets
Benny Sofer, the manager of the Technion's business unit, provides the point of view of someone who is responsible, among other things, for the commercialization of the technologies developed at the Technion. "In the field of transferring information from the Academy of Industry, there is a huge miss for the state... Due to the lack of management skills and the lack of funds, the Israeli technologies that are developed here find their way to startup companies on the West Coast, which causes foreign venture funds to sweep the profits on our knowledge and work in Israel. The potential fails to materialize here, due to a lack of resources - and most of the profit is raked in by investors. By doing so, we manage to lose jobs and do not promote industry."
According to Sofer, the commercialization companies have serious challenges in the form of aggressive dilutions when working with entrepreneurs. "There are not many entrepreneurs in company management and fundraising. There is no presence in Israel of large companies in the field of biomed - just as the field of communication has the presence in Israel of giants such as Intel, IBM, and the like. What is meant by aggressive dilutions? Universities do not have the ability to continue investing. If you held equity - it is getting depleted. Today we go absolutely for royalties. This is the built-in anti-dilution mechanism."
And another topic that bothers the author: the research budgets: "If we compare the Technion to Harvard or MIT, at the Technion - the entire research budget of the university is 60 million dollars. MIT has a budget of 1.4 billion dollars… and that says it all…”
Reuven Krupik, CEO of Clal Biotechnology Industries, recently said in a press interview that in his opinion, despite the crisis that has hit the world, the strength of the Israeli economy has proven itself. In his estimation, if there is no special surprise, he believes that 2011 will also be a successful year for the Israeli economy. Without getting caught up in over-optimism, Krupik says, the biomed field is relatively immune to economic crises. The reasons for this are the large involvement of the governments, the large investment in the field and the fact that patients need medicines even in times of crisis. According to him, there is greater activity in the field of biotechnology "I am convinced that much of Israel's economic future will be affected by this field".
According to Krupik, the support for the growth of the biomed field will come from a combination of the creation of new funding sources and the experience that has been accumulated in recent years. "If you combine the new funding sources, the experience and the serious people who entered the field, you come to the conclusion that biotechnology is going to become a very significant field in the economic structure of the State of Israel."
Whereas Shamil Levy and Gili Ra'anan, partners in the Sequoia venture capital fund, recently announced their intention to enter the field of life sciences, stating that they hope to become pioneers for all other foreign funds investing in life sciences. Levy said that the company will mainly focus on medical device companies and the fund can help an Israeli company sell medical devices in attractive markets such as India and China. In his estimation, this is an excellent period for establishing companies in Israel.
According to CPA Yoram Wilmovski, partner and manager of the life sciences field at Ernst & Young Israel, there are currently about 900 companies in the life sciences industry, with fairly stable about a third of them in the biotechnology field and two thirds in the medical equipment field. 59 of the companies are public companies traded in Israel, the United States and Europe, and the rest are private companies.
Ernst & Young Israel data shows that about 70% of the companies in the industry are companies in various stages of development, divided into 31% that are in the seed stage and about 39% in the development stage. About 30% of the companies in the industry have reached the revenue stage, of which 24% are in the initial stage of their sales and only 6% are in the stage of revenue growth. "This division stems both from the entrepreneurial spirit that characterizes the industry in Israel, and from the fact that most companies are sold at an advanced stage of development or upon reaching sales, and only a minority continue to operate in Israel in the long term."
The pace of establishing companies has been stable in recent years, and it stands at about 10% per year, says CPA Wilmovski. The pace of selling and closing companies is similar, so the total number of companies remains fairly constant over the years. Close to 30% of the companies are veteran companies of 10 years or more, and the rest of the companies, which are relatively young, are distributed in terms of their age quite uniformly over the past decade.
"It is certainly possible that the investments of venture capital funds in 2011 will approach the investment volumes that characterized the peak years of 2008, 2005 and 2000," says CPA Wilmovski. "For comparison, the scope of investments in 2008 was about 383 million dollars, in 2005 about 379 million dollars, and in 2000 about 435 million dollars. The average amount of investment for the company reached an all-time high in the first three quarters of 2010, amounting to approximately 10.6 million dollars."
