Israel's Flourishing Biotech Industry
May 10, 2004

By Ketaki Sood, Larta Institute Research Economist

Israel has transformed rapidly in the last few decades into a leading contender in advanced technology and innovation.

Investments in research and development in Israel in the 1960s and 1970s by the Ministry of Industry and Trade (MIT) and other domestic organizations was a crucial factor in developing Israel's high-tech sector. R&D expenditures in Israel increased by a mammoth 300 per cent between 1969 and 1985 and the number of scientists and engineers involved in industrial R&D increased by 500 per cent during the same period. The areas of electronics, electro-optics and computers largely reaped the result of such investment in R&D and growth in scientific personnel. The life sciences industry did not constitute an integral part of this expansion and remained a nascent sector at this stage of Israel's transformation into a high-tech hub. It wasn't until the 1990s, when the life sciences were made a national priority in Israel that the sector evolved into one of the leading industries in the nation. The Israeli government allocated $22 million in 1995 and $24 million in 1996 to R&D in the life sciences, and the industry has flourished since, becoming one of the world's centers for life science innovation.

Today, the life sciences represent 35 per cent of Israel's civilian research activity, and the country is recognized worldwide for its revolutionary academic research and scientific infrastructure. Moreover, Israel has a large number of graduates in mathematics, physics and computer sciences, and this talent pool has contributed to the solidification of its scientific and technological base.

The number of biotech companies in Israel increased from 30 in 1990 to 160 in 2000, and currently constitute 2.5 per cent of the world's biotech sales.

Source: The Israel National Biotechnology Committee

The therapeutics segment dominates the Israeli biotech sector accounting for 48 companies and 1,486 employees, and therapeutic pharmaceuticals account for 67 per cent of biotech sales.

Breakdown of Israeli Biotech Companies and Employees by Segment

Source: The Ministry of Industry and Trade, Office of Chief Scientist

Government support has also been a crucial factor in the growth of Israel's life science industry. The government has created several programs that provide the life sciences industry financial and technological support. The Office of the Chief Scientist (OCS) provides $400 million in grants annually to promising life science companies and has created a network of 24 technology incubators to promote technology transfer from academic institutions to industry. Companies can also apply for funding to the OCS to cover their R&D costs. One of the OCS's programs, "Magnet," sponsors and funds the creation of consortia of companies and universities to develop new generic technologies.

Cooperation and partnerships between academia, industry and the government in Israel have catalyzed growth in the nation's life sciences sector. Still, challenges remain. Sales of Israel's biotech-derived products despite industry growth remain weak, and are yet to reach their full potential. There is a paucity of venture capital funding. And while there is no scarcity of a large talent pool of scientists and engineers, there is a lack of experienced managers and entrepreneurs to successfully commercialize innovation both domestically and in foreign markets.

Israel recognizes the need to address these hurdles to reap the investment it has undertaken in the life sciences. The country has therefore initiated alliances with the U.S to facilitate the commercialization of its life science technologies and has partnered with U.S life science companies to gain access to new markets. Several organizations and programs promoting U.S Israel collaboration within the life sciences have emerged as a result.

Earlier this year, Larta Institute was funded by the U.S-Israel Science & Technology Foundation (USISTF) to develop and implement an entrepreneurship training program for Israeli life science companies. The Foundation operates as a joint venture between the Israeli and U.S Governments, and has funded 5 projects around the U.S that cover research and innovation in Israel, incubation services, training, focused matchmaking and sector-specific forums. The Foundation has been a galvanizing force in promoting entrepreneurship in Israel, using the U.S marketplace as a "hook". Larta's "U.S- Israel Life Sciences Bridge Program" is a cornerstone of that commitment. It features distance training of 10 Israeli companies, and focused one-on-one sessions for 2-3 companies at Larta's headquarters in Los Angeles following BIO 2004 in June. Larta's CEO, Rohit Shukla, leads the sessions and the Program. In developing the "curriculum", Larta called on the industry knowledge and contact base of Fidelys, the middle-market investment advisory service affiliated with Larta. Fidelys Life Science Advisors, the life sciences practice of the group, is chaired by Karen Boyd, who was instrumental in helping plan the curriculum and in recruiting several of the expert instructors in the sessions. Among them were Kevin Hahnen of MVS Solutions Inc., a Fidelys "bench" member and expert on technology evaluation and review, Eric Bubbers and Mark Wisniewski of West Coast Biopharma, experts in strategic marketing, and selling and on developing quantitative models to value strategic partnerships, Judy Gordon, an expert in the FDA regulatory process, Kathy Tsang, an expert in clinical trials, Dan Gill of Allergan, who has played the role of "product champion" often on behalf of innovations coming from small companies, Rob Funsten, an expert on strategic alliances, Ethna Piazza and David Schnapf of Sheppard Mullin, experts on IP, Michael Baldridge of Baxter Bioscience, an expert on market research, and Jerry Galwas, member of the Beckman Foundation board and a Larta Institute Fellow.

The combined contacts, resources and knowledge base of Larta and Fidelys, along with Larta's partner in Israel, ATID-EDI Ltd., have established Larta's program as a model. The videoconference training sessions, delivered from the Los Angeles and Orange County offices of Sheppard Mullin Richter and Hampton to the 10 carefully selected Israeli life sciences companies ends on Wednesday, May 12. Through seven focused 2-3 hour sessions, experts drawn from industry have contributed their know-how to young Israeli entrepreneurs interested in seeking a foothold in the U.S market. The program has received accolades in Israel and in Los Angeles for the depth and breadth of information and knowledge.

Arnold Brenner, Executive Director of USISTF, said, "As a grantee of the U.S.-Israel Science and Technology Foundation's business development project in Life Sciences, Larta brings extremely valuable know-how to Israeli companies, which will result in not only business for them, but through partnerships being developed, will bring both business opportunities and unique Israeli technology to the U.S."

Larta CEO, Rohit Shukla, recently returned from his second visit to Israel on behalf of the Program. On his recent visit, he spoke at Bio Israel 2004, the largest life sciences exposition in the Middle East. Among many speaking engagements was one at the end of the event, during which he focused on the importance of Israel furthering its position as a world-class center of research and intellectual inquiry, and about its "symbiotic relationship" with the marketplace in the U.S. "Israel offers not just world-class outsourced R&D for U.S companies, it also offers great innovation in the products and advancements of the life sciences generally. But it lacks an established infrastructure for next-level companies, despite its considerable assets. Larta's program plugs a key gap in helping to accelerate the entrepreneur's path to market via strategic partnerships, alliances, distribution channels and access to executive and managerial talent," he said.

Read Biotech Update from the May 3, 2004 issue of Larta VOX

Read American Experts Help Israeli Bioscience Companies from the April 26, 2004 issue of Larta VOX

Read The U.S. Israel Life Sciences Bridge Program from the April 12, 2004 issue of Larta VOX

Read Israel Shows Promising Biotech Potential from the March 8, 2004 issue of Larta VOX

Read Larta Institute Program Trains Biotech Executives from the March 8, 2004 issue of Larta VOX

Read Larta Wins Grant To Promote US-Israel Biotech from the December 22, 2003 issue of Larta VOX

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