PRINT THIS PAGE Life sciences in Israel – It's a question of investment
03/01/2007. Source:IVCJ. Ruben Krupik
Clal Biotech CEO Ruben Krupik had been seeking a means of bringing drugs from the early development stage to market, says the Israel Venture Capital Journal. Teaming with Teva Pharmaceutical may well turn out to be the best answer. Avida Landau explains. 
When we think about the life sciences in Israel, there are many things about which we can be proud. The strong academic and health-related research conducted locally has been at the forefront of world research with groundbreaking achievements, Nobel Prizes and global recognition. But despite great successes, Israel is still trailing the world in all aspects of late stage development and pharmaceutical manufacturing. With the exception of Teva Pharmaceutical, there are virtually no local powerhouses that could propel academic achievements to mass production and marketing.
On the face of it, Israel has all it needs – first rate universities and academic research facilities (such as the Rappaport Family Institute at the Technion in Haifa where two Nobel Prize winners conducted their research); hospitals and medical facilities that very often cooperate and employ the same practicing doctors who conduct academic research; and government assistance from the Ministry of Health and the Office of the Chief Scientist at the Ministry of Industry, Trade and Labor that provides grants and other incentives for development.
Despite the "environmental" advantages, very few ideas that are conceived in Israel reach full maturity in Israel. Most ideas and medical developments that get started locally either get buried due to lack of funding or are sold to large multinationals with the financial strength to carry on development from infancy all the way to market.
In attempting to overcome this problem, companies such as CanFite, Medigus, Bioview, Nasvax, and Kamada have raised funds through public offerings on the Tel Aviv Stock Exchange. It is questionable, though, whether this route will be sufficient to fund future capital requirements. Ruben Krupik is CEO of Clal Biotech Industries (CBI) – the largest investor in the life sciences in Israel.
According to Krupik, despite the favorable environmental conditions in Israel, the existing financial platform fails to match the necessary investment needed for success in the life sciences. "What was good for the high-tech industry in the 1990s is not necessarily good for the biotech industry in the 2000s," maintains Krupik. Krupik says that investments in the life sciences need to be much longer and larger than is the case in high-tech or even the medical device industry. For example, a drug could take up to 14 years and hundreds of millions of dollars to develop. In essence, the long-term needs of the industry do not match the short-term financial capabilities of the existing venture capital investment model.
So when Krupik began managing CBI in 2003, he and his team decided that the best way to cope with the distinctiveness of the business and help advance a pharmaceutical product from birth to maturity was to introduce a new investment model.
"From the experience we gained in the hightech industry, as well as through management of Biomedical Investments, we concluded that in order to reach full potential, we would need to match the financial and managerial models to the natural characteristics of the industry – long term efforts, high risk, perseverance with significant investments, and the ability to create varying models for strategic cooperation," says Krupik.
In order to materialize his vision for corporate collaboration, Krupik and his team approached Israel-based Teva Pharmaceutical Industries, the world's largest manufacturer of generic drugs.
"We believed," says Krupik, "that a good partnership between a strategic body and one with financial abilities, would bring about a long term stable platform that could reach full potential in the field."
A deal with Teva was finalized in 2005 under which Teva and Clal Industries and Investments (CII) agreed to invest $50 million in CBI (in addition to the $100 million invested up to that point). The deal gave 20 percent ownership of CBI to Teva and 80 percent to CII, creating an alliance with immense power and potential for future growth.
This collaboration model could be the answer to the inability of Israel's life science companies to reach late stages of development. It could help stop good ideas from leaving Israel and allow them to reach fruition locally.
This article appeared in the Israel Venture Capital & Private Equity Journal (IVCJ). IVC Research Center publishes the Israel Venture Capital & Private Equity Journal, a quarterly review of trends and developments in the Israeli-related venture capital industry. IVCJ, distributed worldwide, is dedicated to provide wide-range coverage of Israel's venture capital industry. For more information please visit www.ivc-online.com
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