A MONTHLY REPORT COVERING NEWS AND INVESTMENT OPPORTUNITIES JOSEPH MORGENSTERN, PUBLISHER August 2010 Vol. XXV Issue No.7 You are invited to visit us at our website: http://ishitech.co.il Iron Dome destroys missiles

Israel will deploy at least With the United States-Israeli Arrow as the main two of its homemade Iron protection for the Jewish state. “The Iron Dome is Dome anti-missile systems an effective and innovative mobile defense solu- by November, according tion for countering short range rockets and 155 to the country’s Defense mm artillery shell threats ... in all weather condi- Ministry. tions, including low clouds, rain, dust storms or

The decision was made after the final set of tests co.il were successfully carried out. http://ishitech. Although the system is not without controversy at home, several countries, including India, are interested in purchasing it from Israel. In this Issue Other than its potential to enhance Israel’s strate- gic edge, analysts believe the system has a far- Iron Dome destroys missiles reaching impact on the big picture of arms control George Soros buys Comverse stake Hebrew U. scientists demonstrate novel memory and logic and global stability. device Israeli VC firms’ share in local funding hits 10-year low Iron Dome is a mobile air defense system that is German and Israeli ministries fund research project with inge manufactured by Israel’s Rafael Advance Defense watertechnologies AG VocalTec merges with YMAX Systems. The government company has a track Amdocs, AT&T launch R&D center in Israel record of producing highly regarded weapon Israeli-developed boiled potato batteries may provide cheap systems including the Popeye surface to air mis- power Gesture control sile, the Spike anti-tank guided missile and the The Origins of Israel’s Pharmaceutical Industry Typhoon weapon system. Businesses ink deal with Israeli incubator ECI enters into partnership with BT’s Openreach for UK’s next- Iron Dome is Israel’s answer to the threat of short- gen broadband Life sciences become big business in Israel and medium-range rockets that can travel some 35 to 45 miles. Many of the rockets have fallen on communities and as far inland as Ashkelon. It is the final piece of the Israeli defense against aerial attack. It is seen as the last line of defense.

Copyright 2010: Israel High-Tech & Investment Report Subscription, bulk copy and reprint information available on request Editorial Offices: P.O.Box 33633, Tel- Aviv 61336, Israel Tel-: +972-3-5235279 Fax: +972-3-5227799 E-mail: [email protected] August 2010 fog,” according to specifications. has always rejected that idea. “The system uses a unique interceptor with a special warhead that detonates and destroys any However, the system’s backers say its advantag- target in the air within seconds,” it added. es far outweigh negatives. Indeed U.S. President Barack Obama has put his full weight behind the The system identifies the launch of an artillery program and what he described earlier this month shell or rocket and then monitors its trajectory. as “Israel’s special security needs.” The data is analyzed and a point of impact is established. If the target area poses a risk then In May, the White House asked Congress to an interceptor will be launched to take out the approve a $205m. package to help Israel com- threat. This happens as quickly as possible to try plete the manufacture and deployment of the Iron to ensure the incoming warhead is destroyed over Dome. In so doing Obama’s staffers said they an area where there is less potential risk to those understood the risk Israelis face both to the north on the ground. and the south.

“Iron Dome’s breakthrough is not the intercepting Iron Dome was developed following the war with of missiles, but its new concept based on highly- the South- Lebanon-based Hezbollah in the sum- discriminating command and control technology mer of 2006. Israel sustained heavy rocket fire that automatically determines which threats to from positions just across its northern border, intercept and which to ignore all in 15 to 90 sec- with some loss of life and considerable damage onds,” according to Barbara Opall-Rome, the to property. Israel bureau chief of Defense News. Throughout the last decade Israel also faced Indeed in recent trials, it is reported that the sys- thousands of rockets fired on its southern towns tem was able to detect simultaneous launches from the Gaza Strip. In the main all the Israel from various directions and to determine which posed a real threat and which it could ignore. Israel High-Tech & Investment Report Published monthly since January 1985 One of the main points of contention about the Publisher and Editor in Chief Iron Dome is the cost of each anti-missile missile. Joseph Morgenstern, B.A. Chem. Analysts estimate that one salvo could cost as much as $50,000, which for a small country in a Technology Review Board war situation that would quickly become a huge Prof. S.J. Joel-Cohen, MD, FRCS. FRCOG (1996-2002) sum. Prof. Hylton Miller, M.B. Ch.B. Dr. Clive L. Carpel, M.B. Ch.B. This is countered by Israel’s defense establish- Copy Chief ment, which maintains that the system could pre- Debbie Mor vent wars from breaking out and the cost of each Web Master day of a military campaign is far higher than the Marty vonBokel upkeep of the Iron Dome. Graphics Consultant Daniel Morgenstern Other critics suggest the system may prove inef- Subscription Inquiries Tel-. +972-3-5235279 Fax. +972 3-5227799 fective against the Kassam rockets fired from E-mail: [email protected] Gaza, saying the distance and time it takes for Annual subscription $95.- per year, for 11 issues, the homemade rockets to reach Israel is too short Israeli residents add 16% VAT for the Iron Dome. Some propose the use of laser Web Edition and Achives technology instead, but Israel’s Defense Ministry http://ishitech.co.il

 August 2010

Defense Forces managed to do was to put in $7.55 per share yesterday. place a warning system that gave residents a few seconds to run to their nearest bomb shelters. Comverse filed a request with the SEC to sell Experts believe the Iron Dome will change the 10% of the 28 million shares it holds in Verint face of the battle between Israel and its enemies Systems Inc. (Nasdaq: VRNT). Even after a sale, just a few miles away in Lebanon and Gaza. Comverse will still remain Verint’s controlling shareholder, with a stake of around 60%. Israel hopes that the Iron Dome will not only prove a success at home but that it will also gener- Hebrew U. scientists demonstrate novel ate cash in sales to foreign governments. Early memory and logic device indications are that there is considerable interest Protein from poplar trees can be used to greatly overseas. India is among those who is interested reduce size of memory elements and increase the in the system and already enjoys a close defense density of computer memory relationship with Israel.

Scientists from the Hebrew University of Jerusa- “By developing, testing and ultimately deploying lem have succeeded in showing how it is possible the Iron Dome in less than three years, Israel re- to greatly expand the memory capacity of future establishes itself as a technology powerhouse as computers through the use of memory units based well as a preferred supplier on the world market,” on silica nanoparticles combined with protein mol- added Opall-Rome ecules obtained from the poplar tree.

The Iron Dome is the latest in a series of missile- In doing so, they say, they have developed an related programs unveiled around the world. It is alternative avenue to miniaturize memory ele- viewed in the current thinking in Washington as a ments while increasing the number and capacity sea change in policy towards missile defense. of memory and functional logic elements in com- puters. This approach, they say, could replace “A great amount of U.S. technology is in the Iron standard fabrication techniques in use until now Dome. Politically, missile defense is changing for increasing computer memory capacity, a pro- from the great undermining force wrecking arms cess which involves ever-increasing manufactur- control, to a capability that will receive much more ing costs. official U.S. support in the future. Missile defense will be a cornerstone of all future arms control and The Hebrew University project involves the genet- stability,” Bracken said. ic engineering of poplar protein to enable its hybridization with a silicon nanoparticle. In this George Soros buys Comverse stake process. The nanoparticles are attached to the George Soros has reached a 5.14% inner pore of a stable, ring-like protein (the poplar stake in Comverse Technology Inc. derivative), and these hybrids are arranged in a (Pink Sheets: CMVT.PK) accord- large network, or array, of very close, molecular ing to a statement that his Soros memory elements. Fund Management filed with the US Securities and Exchange Com- Prof. Danny Porath and his graduate student mission (SEC). The Soros Fund Izhar Medalsy of the Institute of Chemistry at the Management owns 10,381,566 Hebrew University have succeeded in successful- shares in the company. ly demonstrating how stable computing activity in a tiny memory element can be carried out in this The stake is worth $78.3 million way. The practical result is a cost-effective system at Comverse’s closing price of that greatly increases existing memory capacity

 August 2010 while significantly reducing the space required to The average high-tech financing round was $3.3 carry out this volume of activity. million, compared to $2.57 million in the previous The genetically engineered poplar-derived protein quarter and $2.29 million in the second quarter of complexes were developed in the laboratory of 2009. Prof. Oded Shoseyhov in the framework of the doctoral thesis of Dr. Arnon Heyman at the Robert Sixty-three companies attracted more than $1 mil- H. Smith Faculty of Agriculture, Food and Envi- lion each. Of these, two companies raised more ronment of the Hebrew University. than $20 million each, seven companies raised $10 million to $20 million each and 15 companies An article describing the work of the scientists has raised $5 million to $10 million each. been published in the Journal of Nature Nano- technology. In the second quarter of 2010, Israeli VC funds invested $91 million in Israeli companies, 17% The researchers are hopeful that this technology, more than the $78 million in the first quarter, but which has been patented by Yissum, the technol- 19% below the $113 million invested in the cor- ogy transfer company of the Hebrew University, responding quarter of 2009. and licensed to Fulcrum SP Ltd., will prove to be a commercially successful alternative to current Israeli VC funds accounted for 26% of the total computer systems. amount invested in Israeli high-tech, compared to 33% in the previous quarter and 40% in the Israeli VC firms’ share in local funding hits corresponding quarter of 2009. The remainder 10-year low of capital came from foreign investors as well as An Israel Venture Capital Research Center - IVC from non-VC Israeli investors. quarterly report on venture capital fund raising shows that while Israeli funds invested more in Israeli VC funds invested $12 million in foreign the second quarter than they did in the first quar- companies during the second quarter. ter, their overall share of local fundraising fell to its lowest level in ten years. The life sciences sector continued to lead capi- IVC Research Center CEO Koby Simana said, tal raising both in the second quarter, with $109 “We are seeing what may be the seeds of recov- million (32%), and in the first half, with $195 ery in capital raising by Israeli high-tech compa- million (34%). The Internet sector followed with nies. However, the share of Israeli VC fund activity $70 million (20%)) in the second quarter.Vending continues to drop - declining in the second quarter machine sells medicinals to its lowest level in ten years. In the meanwhile, After soda, candy and condoms, a vending some of the impetus can be explained by non- machine for medicine? Israeli VC funds stepping up. It still remains to be The pharmaceutical department of the Health seen if the increase in amounts raised is a one Ministry is pushing to change regulations so that time event or a bona fide change in the trend.” medicines that do not require a prescription can be sold in vending machines. In the second quarter, 104 Israeli high-tech com- panies raised $343 million from venture capital German and Israeli ministries fund research funds and other venture investors both local and project with inge watertechnologies AG foreign. 122 companies up 47% from the $234 The German Federal Ministry of Education and million raised by 91 companies in the first quarter Research (BMBF) and the Israeli Ministry of Sci- of 2010, and 23% above the $279 million raised ence and Technology (MOST) have launched a the amount in the second quarter of 2009. research project with 1.5 million euros of funding. The three partners in the project are Dresden

 August 2010

Technical University, the Ben-Gurion University VocalTec was founded in VoIP in 1994, and went of the Negev in Israel, and the German company public in 1996. The share price skyrocketed fol- inge watertechnologies AG, which specializes in lowing an investment by Deutsche Telekom AG ultrafiltration and membrane technology. The aim (NYSE: DT; XETRA: DTEG). However, other com- is to find ways of reducing fouling and scaling in panies dominated the VoIP market that VocalTec membranes – especially in the context of treat- invented, and the company fell by the wayside as ing municipal waste water – in order to improve a small-cap firm that failed to leverage its status the membranes’ performance and durability and as pioneer. ultimately improve the efficiency of a reverse osmosis (RO) plant. On news of the merger, VocalTec’s share price soared 150%. The market cap of $19 million was For now, “The draft proposal was sent to everyone a two-year high, though still only a fraction of the concerned, and the final version will determine peak market cap. how the machines will be monitored,” the Health Ministry said in a statement. “All other issues, The merged company will be traded under the including the location of the vending machines, symbol “CALL”. VocalTec and YMAX estimate will be discussed after receiving the comments on the merged enterprise value at $245 million, or at the draft.” least $17.50 per share. Based on the number of shares of the merged company, the market cap BGU Researcher Receives US-AID MERC Grant would be more than $200 million, reflecting a $20 for Water Purification Project with the Palestinian million value for VocalTec’s part. Authority Ben-Gurion University of the Negev (BGU) VocalTec said that it expects the merged com- researcher Dr. Moshe Herzberg and Prof. Moham- pany to have $110-125 million revenues this year, med Saleem Ali-Shtayeh of the Biodiversity & and to post a profit in the current quarter. Environmental Research Center (BERC) in Nab- lus, have received a US-AID MERC grant of VocalTec president and CEO Ido Gur will man- $659,410 to increase the clean water supply age the merged company’s business in Israel. He around Israel and the Middle East. said, “I am excited about the potential to become The grant will address befouling of Reverse the worldwide, leading provider of VOIP and soft Osmosis (RO) membranes during reclamation of phone applications using SIP. I strongly believe secondary wastewater. Reverse Osmosis mem- that the synergies enabled by this business com- brane filtration is normally used for desalination bination will allow us to achieve this target.” and reclamation of secondary effluents removing YMAX CEO Dan Borislow will become CEO of the organics and undesired salts from water. VocalTec merged company. He founded the Florida-based soars 150% on YMAX merger company less than three years ago. YMAX is the largest CLEC (Competitive Local Exchange Car- VocalTec merges with YMAX rier) in the US. The company’s magicJack device VoIP pioneer VocalTec Commu- connects to telephones or PCs, and can make nications Ltd. (NASDAQ:VOCL) calls for a fixed annual fee. The company says announced a merger with private that it has sold over 6.5 million magicJacks since company YMAX Corporation, the 2008. creator of magicJack. VocalTec will essentially be absorbed by Amdocs, AT&T launch R&D YMAX, and the merged compa- center in Israel ny will be traded on Nadsaq. “A historic day,” is how Amdocs Ltd. (NYSE: DOX) president and CEO

 August 2010

Dov Baharav described the company’s new joint the technology transfer company of the Hebrew initiative with US telecommunications giant AT&T University of Jerusalem. Inc. (NYSE: T) to set up the Amdocs Innovations Center, which will enable Israeli companies to The treated potato battery generates energy that develop products and solutions with Amdocs for is five to 50 times cheaper than commercially AT&T. available batteries, Yissum Research Develop- ment Co. said on Thursday. A light powered by As part of AT&T’s “Rethink the Possible” program, the battery is at least six times more economical the company has set up two centers, two in the than kerosene lamps often used in the developing US and one in Israel, with strategic partners: world. Ericsson AB (NYSE; SAX: ERIC), Alcatel Lucent SA (NYSE; Euronext: “The ability to provide electrical power with such ALU), and Amdocs. simple and natural means could benefit millions Amdocs and AT&T of people in the developing word, literally bringing did not disclose how light and telecommunication to their life in areas much they will invest currently lacking electrical infrastructure,” Yaacov in the Israeli innovations center, or how many Michlin, chief executive of Yissum, said. people it will employ, but Baharav and AT&T CTO The findings were published in the June issue John Donovan who came to Israel said that the of the Journal of Renewable and Sustainable activity had already begun, and that the objective Energy. was for full operations to begin before the end of the year. Haim Rabinowitch and research student Alex Golberg at Israel’s Hebrew University jointly with Amdocs develops billing and customer manage- Boris Rubinsky at the University of California at ment relations (CMR) solutions for telecommu- Berkeley discovered a new way to construct an nications providers. The innovations center aims efficient battery using zinc and copper electrodes at fostering collaboration with telephone, mobile and a slice of an ordinary potato. phone and smartphone manufacturers, applica- tions developers, and network equipment makers They found that boiling the potato prior to use in in order to expedite the development of the next- electrolysis increased electric power up to 10-fold generation broadband applications for wireline over the untreated potato and enabled the battery and mobile devices. to work for days and even weeks.

Amdocs and AT&T called on Israeli companies to Potatoes are produced in 130 countries over a approach them and work with them. “We’ve seen wide range of climates and thus available year that most of the smartest people actually don’t round. It is the world’s number one non-grain work for Amdocs,” said Baharav. “That’s why we starch food commodity. developed this program to work with start-ups, and enable them to grow through joint projects or Gesture control investment in them.” Most people think of video chat when they think of front-facing cameras on phones like the HTC Israeli-developed boiled potato batteries Evo 4G or the upcoming iPhone 4. But an Israeli may provide cheap power tech company has another use in mind: gesture An electric battery based on control, such as answering a call simply by wav- boiled potatoes could provide a ing your hand in front of the lens. Interesting. cheap source of electricity in the developing world, according to EyeSight Technologies has been offering what

 August 2010 it calls “touch-free” gesture control for Nokia founded in 1935 by Elsa Kuver and Dr. Gunter phones since last year, according to Engadget, Friedlander in Jerusalem. Prior to World War II, and the company has just announced that it’s Germany was the center of the global pharma- now offering its EyeCan and EyePlay develop- ceutical industry. Many immigrants from thatcoun- ment tools for Android phones, such as the dual try brought with them pharmaceutical expertise camera-packing (and apparently sold-out) Evo that provided a firm foundation upon which the 4G. Israeli drug industry was built. Notwithstanding the ongoing violence of the Middle East, Teva In an EyeSight demo video, users can be seen enjoyed some advantages over its swiping through photos, waving up and down to competitors around the world. For one, Israel skip music tracks, taking and rejecting incom- attracted a ing calls, scrolling through Web pages, sending high concentration of scientists – more per capita text messages, and even hurling virtual throwing than any nation in the world. Furthermore, the stars (for a game), all by waving their hands in Israeli government granted Teva tax subsidies to front of the phone’s front- and rear-facing camera encourage the development and production of lenses. new drugs. It was in this environment that Teva Interesting concept, although why bother with grew, going public in 1951 on the Tel Aviv Stock EyeSight’s “touch-free” gesture technology when Exchange. Having consolidated its domestic posi- you can just swipe your phone’s touch screen? tion, Teva began to expand geographically in the early 1980s. Eli Hurvitz, a kibbutznik who joined Let’s not forget that not every mobile phone has the company in a junior a touch-enabled display. Plenty of popular “mul- management position after graduating in econom- timedia”-type phones don’t — and remember, ics and business administration from Hebrew Uni- the Android OS was designed to work with non- versity in 1957, was destined to transform Teva touch screen phones as well as touch screens. into a global pharmaceutical powerhouse. He per- EyeSight’s gesture technology could be a handy ceived an opportunity to penetrate the U.S. market way for those with bargain-priced handsets to when the federal Waxman-Hatch Act passed Con- swipe their way through Web pages, photo gal- gress in 1984. This legislation concerned generic leries or music play lists without having to fiddle drugs, treatments that have lost their patent pro- with arcane soft-key menus. tection. Also known as multi-source or offpatent medicines, generics are chemically identical to Then again, the EyeSight software “solution” branded prescription drugs, but they are priced 30 might be handy even on touch screen phones: to 70 percent less than patented versions. say, for taking a picture by waving your hand Hurvitz used the generics segment as Teva’s rather than tapping the screen, or taking a call entree into the U.S. pharmaceutical market. In while you’re bobbing and weaving down a crowd- 1985, the company forged an agreement with ed sidewalk. chemical conglomerate W.R. Grace to create TAG Pharmaceuticals, a 50-50 joint venture. In So, yes, an interesting concept. But the EyeSight 1985, TAG acquired Lemmon Co., a Pennsylva- technology won’t take off unless it’s embraced by nia-based company. Lemmon became the sales app developers and handset makers alike, which and distribution arm for generics manufactured remains to be seen. by Teva in Israel. AlthoughCEO Hurvitz later said that “an Israeli who’s coming to the States has The Origins of Israel’s Phar- a David and Goliath syndrome,” he reminded maceutical Industry himself that little David prevailed in that Biblical Teva (Hebrew for “nature”) was battle. The potential Teva saw in Lemmon soon turned to profits; the U.S. venture’s sales more

 August 2010 than doubled from $17 Teva million at the time of FDA was one of the great moments in his life and its acquisition to about $40 million ranks in parallel with his being awarded the Israel in 1987, by which time it was marketing seven Prize. generic versions of branded drugs. Under Hurvitz’s leadership, Teva has become a The company’s first major new drug, known as global pharmaceutical company specializing in Copaxone, thedevelopment, production and marketing of was originated more than two decades earlier in generic and proprietary branded pharmaceuticals, the as well as active pharmaceutical ingredients. It laboratories of Israel’s Weizmann Institute, where is among the top-20 pharmaceutical companies doctoral student Dvora Teitelbaum was studying – and is the largest generic pharmaceutical the use of synthetic proteins to quell multiple scle- company – in the world. rosis attacks in animals. Together with Professors Net income for 2007 reached $1.95 billion, a 5 Michael Sela and percent increase over 2006. Net sales for 2007 Ruth Arnon, Teitelbaum spent 15 years isolat- were $9.4 billion, with global Copaxone sales ing and researching the polymer COP-1 (later of $1.71 billion. branded Copaxone), Teva’s share price and net profits rose passing preliminary clinical trials in 1986. The thousands of percentage points during treatment reduced the relapse rate for people Hurvitz’s active leadership tenure. Hurvitz in the early stages of relapsing-remitting MS by served as Teva’s President and Chief Executive anywhere from 25 percent to 30 percent in clinical Officer for over 25 years and recently trials. At that time, the Weizmann Institute teamed up with Teva to bring the drug to market. completed over 40 years with Teva. Hurvitz Since Copaxone’s patent had expired during the has served as Chairman of the Board of Teva long development process, Teva requested and since April 2002. Hurvitz received the Israel received orphan drug status from the U.S. Food Prize for Lifetime Achievement for a Unique and Drug Administration. About one-third of the Contribution 350,000 MS sufferers in the United States stood to the Society and to the State of Israel. to benefit from the treatment. Hurvitz, 78, stepped down as CEO in 2002. Initially launched in Israel, Copaxone earned FDA . “The dynamics of the generic industry are approval in 1997. The roll out achieved several influenced by the growing number of people milestones, both for Teva and for MS sufferers. going on pension, people who are sicker and Copaxone was the first drug developed in Israel to have less money for medicinals. As a result, achieve FDA approval for distribution in the Unit- the outlook for generics has become more ed States. Unlike its interferonbased competitors, expansive. it was also the first drug developed specifically to When our generics are launched, in a few days treat MS. Copaxone has been approved for the we have 90 percent of the market and in a few treatment of relapsing-remitting multiple sclerosis. weeks the whole market,” says Hurvitz. In a two-year, randomized, double-blind, place- As a result, he points out Teva is able t post 20 bocontrolledtrial of 251 patients, Copaxone was percent after-tax profit margins. In the western shown to reduce relapses by an average of 29 world, generics are garnering 60 percent of percent when compared with placebo. the market. In Europe, the development is Multiple sclerosis is a chronic, often progressive slower due to the splitting up of industry and disease of the central nervous system (brain, spi- an absence of drug chains. “Teva, by far, is nal cord and optic nerves), that affects 350,000 the world’s largest generic producer. It has people in the United States (approximately 10,000 carved for itself market leadership and future people are diagnosed each year). strategy,” says Hurvitz. Teva has about 160 For Eli Hurvitz, the approval of Copaxone by the

 August 2010 drugs in the FDApipeline waiting approval. This tion his motivation for starting the prize: sum is greater than thatof the next two largest companies in the field. Teva isexpected to “The Technion gave me my entry ticket to the double its sales in the next four to five years and world of computers, and I owe it much of my suc- to maintain its profit margins. cess, but my time there was one of suffering,” he said. “My personal experience in the Technion Businesses ink deal with Israeli incubator was not because I had difficulties learning but Mahoning Valley business and political leaders because of my treatment by professors.” hailed a signing with an Israeli clean technology incubator as an important step in restoring the Yanai also said he wanted to “change the atmo- area’s image as a world economic force. sphere” of the school and reduce itsfocus.

‘’We plan to create a global network for clean tech- According to IBM, Yanai is “One of the most influ- nology headquartered in Youngstown,’’ Michael ential contributors in the history of the data-stor- Garvey, president of M7 Technologies, said after age industry. His 30 years of technical expertise joining fellow Youngs-town businessman Jack and design innovation are legendary.” Scott in signing an agreement with LN Green Technological Incubator Ltd. of Haifa, Israel. What do you think of this prize? Weigh in below.

The signing at the Butler Institute of American ECI enters into partnership Art on the Youngstown State University campus with BT’s Openreach for opens the door to as many as 2,000 jobs over UK’s next-gen broadband seven to 10 years, a goal Garvey said is reason- ECI Telecom (Nasdaq:NMS: able with projects employing 40 to 50. ECIL | PowerRating), a provider of next-generation network solu- Leaders see the local effort as a cradle for startup tions, said today that it has been companies dedicated to environmental technol- chosen as a strategic partner by Openreach, part ogy, such as ways to make buildings more energy of the BT Group (NYSE: BT | PowerRating), in efficient, along with generating power through BT’s drive to upgrade the UK’s broadband infra- municipal waste, solar, wind and other renewable structure. methods When Israeli billionaire Moshe Yanai was a stu- ECI has been selected as one of BT’s strategic dent at the Technion-Israel Institute of Technology partners by Openreach to help bring a large scale in Haifa, Israel, he remembers life being “difficult super-fast broadband solution to the UK and and demanding.” So the tech whiz is funding an realize the Super-Fast Fibre Access project Next- incentive to make life a little better for Technion Generation Access (NGA). students by funding an incentive for professors to be nice. Openreach’s NGA project is designed to meet Yanai donated 40 million shekels -- more than the needs of UK customers, regulators and the $10 million -- to establish the prize, which will last industry by implementing an open, scalable, for 20 years, Israel National News reports. Pro- secure network suitable for today’s and tomor- fessors will be chosen by students based on the row’s demands, Openreach plans to invest a excellence of their teaching and “good personal further GBP1.0bn, out of a total of GBP2.5bn, to interaction with students.” Prizes will be distrib- extend deployment of fibre-to-the-premise (FTTP) uted in upwards of 100,000 shekel increments. and fibre-to-the- cabinet (FTTC) to around two- thirds of the UK by 2015. Yanai explained to the Chronicle of Higher Educa-

 August 2010

Under this multi-year agreement, financial details Jewish Israeli is obliged to serve, produced many of which were not disclosed, ECI will provide future entrepreneurs with highly tuned skills in Openreach with an optimized solution to simplify technology. Immigration from the former Soviet network aggregation and increase scalability and Union in the 1990s also brought an inflow of sci- flexibility entists and engineers.

Openreach will deploy ECI’s Hi-FOCuS Multi-Ser- However, there are concerns that the sector is vice Access Node (MSAN) to roll-out a FTTP and losing its competitive edge. Mr Shani, a former FTTC network countrywide. chief executive of Nice Systems, one of Israel’s biggest technology companies, said: “The fact The new network displays a first-of-its-kind archi- that something is strong today does not neces- tecture, based on state-of-the-art fiber-to-the- sarily mean that it will continue to be strong for premise (FTTP) GPON and fiber-to-the-cabinet many years.” (FTTC) VDSL2 technologies. The financial crisis damaged the venture capital ECI Telecom provides communications platforms companies that account for 70 per cent of fund- to carriers and service providers worldwide. ing for the technology industry. In the first quarter of this year, high-tech companies raised $234m Openreach provides communications providers (€181m, £153m) from venture capitalists, the low- with services and products associated with the est quarterly amount in five years, according to BT network. the Israel Venture Capital Research Centre.

Israel to offer sweeteners to boost high-tech Israel is also worried about possible skill short- The Israeli government is preparing to bolster ages. The number of students taking degrees in high technology industry, a crucial sector of its engineering and science from Israeli universities economy that struggles with fundraising and a is falling. More Israeli scientists are choosing to looming shortage of skilled employees. complete their graduate studies, and later find work, abroad, especially in the US. The plan will give tax breaks to start-up compa- nies and guarantees for Israeli pension funds that Mr Shani said the government plan would give invest in the venture capital funds that support returning scientists income tax benefits on royal- high-tech industries. The government will offer ties they might earn from commercialising their subsidies to foreign banks to establish research research. A position would be established within and development centres for financial technology the finance ministry of chief information officer, in Israel. responsible for co-ordinating all the government’s efforts to help the technology industry. Haim Shani, director-general of the finance min- istry, said the government saw this programme The finance ministry may also offer tax breaks to “as a priority”. The aim is to boost an industry that Israeli start-ups to entice them to have initial offer- accounts for 40 per cent of Israeli exports and 15 ings locally, instead of on the Nasdaq Stock Mar- per cent of the country’s gross domestic product. ket in the US. About 130 Israeli technology com- panies are traded in the Tel Aviv stock exchange, Government help was essential at the outset of but 43 are on the Nasdaq – more than any other Israel’s high-tech boom, when a state-backed country except the US and Sweden. fund was created in 1993 to lure foreign venture capitalists. The industry enjoyed rapid growth, Ester Levanon, chief executive of the Tel Aviv partly because the armed forces, in which every stock exchange, said that a local listing had clear

10 August 2010 financial advantages. An initial offering in Tel Aviv Last year, life sciences accounted for $6 billion in cost about half as much as it would on the Nas- Israeli exports, mostly to the United States, mak- daq, while maintaining the listing could be 90 per ing it one of Israel’s biggest exports. cent cheaper. Israel tops the list of countries in medical device Life sciences become big business in Israel patents per capita and is fourth in the world for Life science industry figures mingle at the Tel Aviv biotechnology patents per capita. ILSI-BioMed conference, which had more than 7,000 people from around the world, June 2010 Observers credit Israel’s success in this extremely competitive market to the nurturing ecosystem Yaron Aizenbud lays out in neat rows a set of the country has produced to foster life sciences patented titanium tools designed for back surgery, innovation. The ecosystem brings together a picks out a curved drill that matches the curve combination of top research at Israel’s universi- of a spine and a plastic model of vertebrae, and ties that transfers to companies, many of which simulates how the drill is used to stabilize a dam- get their start in state-subsidized “incubators.” In aged spine. 2000, the government designated life sciences a priority sector. Aizenbud and the other founders of the small Israeli start-up Scorpion Surgical Technologies Israel and the US Sign Deal to Develop Arrow 3 hope their medical devices will become a new Anti-Missile Defense System solution for back operations, particularly for peo- The deal continues a long and successful history ple with osteoporosis, in some cases even elimi- of cooperation between Israel and the US in the nating the need for replacing ruptured discs. field of anti-missile technology. Photo Archive: IAll Articles Scorpion Surgical was among the hundreds of Israel’s Ministry of Defense and the U.S. Depart- companies displaying their wares in a maze of ment of Defense signed a deal on Sunday eve- rooms and bright lights at a recent biotech and ning (July 25) to develop the Arrow 3 anti-missile life sciences convention in Tel Aviv. Among them defense system were firms with home-grown advances in cell and gene therapy, imaging and heart disease drugs. Israel’s Ministry of Defense and the United States Department of Defense signed a deal on Sunday Aizenbud, a veteran of Israeli high-tech who has evening (July 25) to develop the Arrow 3 anti- worked for IBM, Amdocs and a host of start-ups, missile system, integrating Israel’s anti-missile spoke of the special satisfaction in switching systems. The Arrow 3 will make it possible for gears to the life sciences. Israel to intercept long-range ballistic missiles and weapons of mass destruction from outside the “You feel the difference in what you are doing,” he atmosphere. said. “This is about contributing something to the public.” The agreement was signed by Brig. Gen. Ofir Shoham, head of the Ministry of Defense Admin- The field of life sciences, an umbrella term that istration for the Development of Weapons and refers to medical devices, pharmaceuticals and Technological Infrastructure (MAFAT), and by biotechnology, has become big business in Israel. Lt. Gen. Patrick O’Reilly, head of the US Missile There are more than 1,000 companies, and Defense Agency. another 80 join the field every year, according to industry estimates. The new interceptor will complete Israel’s anti- missile multilayered capacity, which includes the

11 August 2010

Iron Dome, the David’s Sling, and the Arrow. The the experiments are already using the new writ- Iron Dome is a defense system against short- ing system, and Yeda Research and Develop- range missiles and rockets which will be opera- ment Company, Ltd., – the technology transfer tional by November after it recently successfully arm of the Weizmann Institute – is investigating passed final tests. The David’s Sling system is the possibilities for developing and distributing intended to intercept mid-range missiles. Finally, the technology. the Arrow system is a defense system against Sniffing is a precise motor skill that is long-range ballistic missiles and missiles carrying controlled, in part, by the soft palate – the flexible atomic warheads. divider that moves to direct air in or out through the mouth or nose. The soft palate is controlled by New Invention at the Weizmann Institute: several nerves that connect to it directly through Enables Severely Disabled People to Communi- the braincase. This close link led Sobel and his cate and Steer a Wheelchair by Sniffing scientific team to theorize that the ability to sniff – that is, to control soft palate movement – might A unique device based on sniffing – inhaling and be preserved even in the most acute cases of exhaling through the nose – might enable numer- paralysis. Functional magnetic resonance imag- ous disabled people to navigate wheelchairs or ing (fMRI) lent support to the idea, showing that communicate with their loved ones. Sniffing tech- a number of brain areas contribute to soft palate nology might even be used in the future to create control. This imaging revealed a significant over- a sort of “third hand,” to assist healthy surgeons lap between soft palate control and the language or pilots. areas of the brain, hinting to the scientists that the use of sniffing to communicate might be Developed by Prof. Noam Sobel, electronics engi- learned intuitively. neers Dr. Anton Plotkin and Aharon Weissbrod and research student Lee Sela in the Weizmann Institute’s Neurobiology Department, the new system identifies changes in air pressure inside the nostrils and translates these into electrical sig- nals. The device was tested on healthy volunteers as well as quadriplegics, and the results showed that the method is easily mastered. Users were able to navigate a wheelchair around a complex path or play a computer game with nearly the speed and accuracy of a mouse or joystick. Please enroll me as a subscriber to the Sobel: “The most stirring tests were those we Israel High-Tech & Investment Report. did with locked-in syndrome patients. These are people with unimpaired cognitive function who are I understand that if not satisfied, I may can- completely paralyzed – ‘locked into’ their bodies. cel my subscription at any time and receive With the new system, they were able to communi- a refund of the unexpired portion. I enclose cate with family members, and even initiate com- a check for $95 (or the Israeli shekel equiva- munication with the outside. Some wrote poignant lent and 18% v.a.t.) and am sending it to messages to their loved ones, sharing with them, POB 33633, Tel--Aviv 61336. for the first time in a very long time, their thoughts and feelings.” Four of those who participated in

The Israel High-Tech & Investment Report is a monthly report dealing with news, developments and investment opportunities in the uni- verse of Israeli technology and business. While effort is made to ensure the contents’ accuracy, it is not guaranteed. Reports about public companies are not intended as promotion of shares, nor should they be con- trued as such. 12