May 2012 Biotech in – a Land of Promise

Despite world-class science and a highly entrepreneurial population, biotech has been a poor relation to the thriving Israeli medtech sector. Some interesting companies are emerging, and numerous uncut gems warrant serious investor consideration By Anthony Walker, PhD, Partner at Alacrita Consulting

sraeli medtech is widely leads the world for medical device regarded as world-class both by patents per capita (Source: USPTO).

investors and the industry at I Prior to 1996, Israel was home to large. Israeli biotech, on the 186 life sciences companies, but by other hand, does not (yet) enjoy 2010 this number had passed similar standing. True, there are 1,100 (more than 34% being some notable successes on the revenue generating), the majority international stage such as in medtech or healthcare IT (Israeli Protalix, Prolor and the up-and- Ministry of Trade, ILSI). Indeed, the coming BiolineRx, but on the medtech industry in Israel is whole, investor interest in Israeli number 3 worldwide, with many biotech has been lukewarm at best. notable highlights such as:

About the author The stereotype view is that strong . The Pillcam, the first miniature local demand conditions led to the ingested camera developed by development of a cutting-edge Given Imaging Anthony is a Partner at and co- defence industry which in turn laid founder of Alacrita. He has spent the . The closed cell stent design the foundations for high-tech and past 25 years working in and which facilitates blood flow to then medtech start-ups, whilst consulting to the life sciences the heart by Medinol industry. He worked for ICI in biotech did not benefit from this Berkshire and Brazil; consultancy firms stimulus. Whilst this is at least . Surgical sealant Quixil Arthur D. Little and The Wilkerson partly true, it does not fully explain developed by Omrix and Group and biotech company Onyvax the wide gulf between the acquired by Ethicon Ltd. medtech and biotech sectors. . InSightec pioneered the MR guided Focused Ultrasound Success to Date T: +44 (0) 771 340 2771 Surgery (MRgFUS) and is now Israel has a very strong talent pool, global leader in the segment E: [email protected] and has been acknowledged as a . MediGuide, acquired by St world leader in the quality of Jude Medical, developed the Acknowledgements: scientific research institutions Medical Positioning System, Many thanks to all who read an early (WEF 2010/11). It has the highest percentage of engineers in the for real-time tracking of draft of this paper and provided sensors mounted on devices helpful suggestions and input, world, as well as the highest for minimally-invasive intra- including David Ben-Ami, Dan Gelvan, number of physicians per capita. It Lior Carmon, Chanan Schneider, Ranan is unsurprising therefore that Israel body navigation. Grobman, Tami Bar and Yael Porat

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Medtech has clearly succeeded in Biotech: a Promising Start… “Despite these start-ups, with plenty of rewarding Israel boasted two of the earliest investor exits – there has been a commercial biotechnology start- pioneering efforts, the healthy appetite from international ups worldwide. InterPharm was medical device companies for founded in 1978 and developed Israeli biotech industry Israeli firms, including: recombinant cytokines for the did not take off in the Roche Medingo treatment of viral infections, Ventor cancer and autoimmune diseases (IFN- , IL-6 and soluble TNF same way that the US J&J ColBar β receptors). Bio-Technology General, J&J Biosense Webster industry did” another Weizmann spinout, was Covidien SuperDimension founded in 1980 by Professor Haim Covidien Oridion Systems Aviv. In 1988, it received marketing authorization for recombinant In pharmaceuticals, Israel can also human growth hormone. boast impressive achievements: . Doxil, a chemotherapy for …But Weak Follow Through ovarian cancer, developed at Despite these pioneering efforts, the Hadassah Medical Center the Israeli biotech industry did not and was sold to J&J; take off in the same way that the US industry did. For more than a . Teva/Weizmann Institute developed Copaxone, the decade, BTG and InterPharm were multiple sclerosis treatment; the only two substantial players in the biotech sector. Both faced . Michael Sela, who led the classic biotech problems (funding group that discovered crises for BTG, regulatory delay for Copaxone, also led the group InterPharm). that discovered Erbitux; A flurry of start-ups appeared in . Azilect, a Parkinson’s Disease the 1990s, thanks largely to therapy, was developed by government incentives. The Israeli Teva based on research at the government established a steering Technion in Haifa; committee for biotechnology, . Rebif, another MS treatment, spawning dedicated incubators for was developed by the biotechnology and a number of Weizmann Institute in soft funding initiatives. conjunction with Serono’s As happened in Germany at a subsidiary InterPharm; similar time, soft money was . Exelon, a drug for the targeted at very early stage treatment of Alzheimer’s projects producing an excess of originated at the Hebrew undercapitalised companies that University and was developed were little more than one person, and marketed by Novartis. an animal model and a patent application. Predictably, the market In contrast to medtech, licensing turned hostile to biotech, and it Rx projects directly from academia became extremely difficult for to industry has proven successful. early- and middle-stage companies

Page 2 www.alacritaconsulting.com May 2012 “amongst some of the nascent start-ups and one man bands are some uncut gems, some of which have strong potential that warrants serious investor attention...”

to secure funding. Some companies . CureTech, developing novel, attempted to brave the IPO process broad-spectrum, immune but were treated brutally by modulating products for the investors who preferred the lower treatment and control of apparent risk and superior returns cancer, with lead product of the tech sector. comprising an anti PD-1 mAb; . Gamida Cell, a phase III stage Emerging From the Shadows cell therapy company which Biotech remains a poor relation to has partnered its lead product medtech in Israel, both by number with Teva; of companies and by investment. . Macrocure, with its potentially Closer up, the Israeli biotech scene revolutionary cell therapy for is actually quite vibrant (see chart). hard to heal wounds (already A number of these are still ‘one on the market in Israel); man and an animal model’ start- . Pluristem, heading toward ups based in incubators (with multi-national Phase II/III onerous equity/IP hooks), some trials with its proprietary PLX with a small amount of funding stem cell technology; mainly from the Israeli Office of Chief Scientist, and all starved of . Protalix, harnessing its plant cash. But, at the same time, there cell-based protein expression is a growing number of innovative system for biologics; companies with experienced . Proteologics, exploiting the management and backers. The ubiquitin system for the Israeli biotech sector has particular discovery and development of strengths in biologics, vaccines and novel therapeutics, with an cell therapies. An A-Z of promising SAB led by Nobel laureates companies include: Hershko and Ciechanover who discovered the ubiquitin . Andromeda Biotech, co-owned by Teva and local investor Clal, system; in Phase III with Irun Cohen’s . Quark Pharmaceuticals, one of pioneering peptide therapy for the pioneers in RNAi therapies; type 1 diabetes; . Vaxil Bio Therapeutics, . BioLineRx, a clinical-stage, developing T-cell vaccines for biopharmaceutical company tuberculosis and cancer; based in Jerusalem; . VBL Therapeutics, with over . BiondVax, developing a $100m raised and a Phase II Universal Flu Vaccine; candidate for atherosclerosis. Source: www.investinisrael.gov.il

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This non-comprehensive selection Company prepared a report for the of some of the more mature Israeli Office of the Chief Scientist companies may herald the long in 2001 called “Realizing our awaited coming of age of Israeli Potential”. A 2006 report from the biotech. The corollary, we believe, Harvard Business School focussed is that amongst some of the on the “microeconomics of nascent start-ups and one man competitiveness” in the sector. bands are some uncut gems, some These, and others, highlighted the of which have strong potential need for concerted action by all that warrants serious investor stakeholders from government to attention. academic institutions to investors About Alacrita to entrepreneurs in order to create Transformed by Teva? a thriving biotech cluster. Alacrita is a transatlantic consulting firm that provides expertise-based It is too strong to attribute all of Such recommendations are fairly the development of Israeli biotech consulting services to the commonplace in dozens of similar pharmaceutical, biotechnology and life to Teva, but there is no doubt that studies and whitepapers focussed science sectors. this company’s impact has been on every country/region/state/city increasingly influential. Teva’s rise in the world seeking to emulate We combine extensive industry has been dramatic: from local the biotech success stories of the experience and broad functional th distributor at the turn of the 20 West and East Coasts of the USA. capabilities to help our clients create century, through to medicines Almost none of these studies sustainable value, providing: formulator and manufacturer, into provide any meaningful value, . multidisciplinary project teams to the largest global generics largely because they try to discover company and now 12th largest conduct specific assignments the ‘secret sauce’ which simply . instant expertise: high-level global pharma (Scrip 2011 league does not exist. strategic, commercial and tables), positioned between BMS technical But we believe the foundations are and Amgen. This has groomed a . access to an extensive network of now in place in Israel: generation of local talent, many of industry contacts, across medical whom now populate the Israeli . networks of local VCs, devices, diagnostics and biotech ecosystem, meeting the investment angels, experienced pharmaceutical industries shortage of management talent managers and entrepreneurs; Alacrita's team has industry that dogged the early years of experience and a consulting track . inflow of international capital Israeli biotech. Teva has also record, ensuring that projects are for biotech (e.g. Roche’s brought local biotechs under its delivered with both professionalism umbrella to feed its nascent R&D collaboration with Pontifax; and real-world relevance. pipeline, and has been especially Orbimed’s $200m dedicated Israeli fund); active in biologics and cell Alacrita LLP therapies. This trend is likely to . investment by Big Pharma (e.g. London Bioscience Innovation Centre continue if Teva chooses to play Merck-Serono’s new drug 2 Royal College Street the role of a national champion. development incubator). London NW1 0NH

Back to the Future? The old joke says that biotech is Alacrita LLC the industry of the future – and Looking at numerous papers and Cambridge Innovation Center will probably always be. In Israel, 1 Broadway studies on this topic, it seems that perhaps, that future is now. Cambridge, MA 02142 every five years or so someone asks “when will Israeli biotech grow up?”. Strategy consultant Monitor www.alacritaconsulting.com

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