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Biotechnology
The Israeli Case
Definition
Using living organisms, cells or
biological agents, to produce goods
and services.
Modern biotechnology arose when
the technologies of gene
engineering became available in
the early 1970's.
European Life Sciences
Source: E&Y
U.S Life Sciences
Source: E&Y
European Biotechnology Per Country
Source: E&Y
5 Years IPO Trends in Europe
Drug Development Process
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Pre-clinical tests
IND – Investigation New Drug Application
Clinical Trials
NDA – New Drug Application
Approval – Periodic reports must be
submitted continuously
Phases of Clinical Trials
Number of
Patients
Phase 1 20 - 100
Up to several
Phase 2
hundred
Several
hundred to
Phase 3
several
thousand
Length
Several
months
Several
months to 2
years
1 - 4 years
Purpose
Percent of
Drugs
Successfully
Tested
Mainly safety
70 percent
Some short-term
safety, but mainly
effectiveness
33 percent
Safety,
effectiveness,
dosage
25 - 30 percent
The Israeli Biotechnology Market
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160 companies (30% in therapeutics)
4000 employees
Market valuation: $3.5 billion
Market capitalization: $2.7 billion
Av. Growth in no. of companies: 14%
Sales: $800 million (incl. the Copaxon)
75% of the companies employs less then 20
21 therapeutics drugs in clinical trials
54 therapeutics drugs in pre-clinical trials
Israel Biotechnology Sector
B iotechnology C om panies in Israel by Location
Other
16%
M igdal-
Rehovot
25%
Ha'E m ek
8%
Haifa
14%
Tel-A viv
14%
Jerusalem
23%
Israeli Biotechnology Companies
By Field of Technology
Segment
Thepeutics
Diagnostics
Agrobiotech
Biological
Bioinformatics
Other
Total
Companies Employees
43
27
30
14
6
48
160
1200
471
830
492
231
300
3524
1999
sales $M
166
28
114
79
3
250
640
2000 Market
Value $M
2,222
138
286
149
472
350
3,617
The Sample
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10 bio-pharmaceutical companies
2 specialized incubators
2 specialized VCs
2 incubator companies
3 small companies (up to 25 employees)
1 medium company (70 employees)
4 public companies
Work Experience
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All entrepreneurs have strong academic
experience in their field
All entrepreneurs hold PH.d or M.D.
3 entrepreneurs had former
entrepreneurial experience
The Importance of a Team Work
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6 companies in the sample were created
by teams
A basic team consist usually of a scientist
and an experience entrepreneur
In half of the cases the entrepreneur was
searching for a scientist with idea
Companies founded by team of
entrepreneurs are more successful
Company
Team
Development
Phase
Phase II
Phase III
Location
S+S
Work
IPO
experience
A + SU (I)
A + VC (A) Nasdaq
Londo
n
A
Nasdaq
Gamida-Cell
Keryx
E+S
E+S
Biotechnology
General (BTG)
XTL
Approved Drugs
Rehovot
S+E
A + I (A)
Londo
n
Phase II
Rehovot
Mindset
Idgene
Pharmos
Atena Cardionet
Natural Compounds
Cell-Stain
S
S+E
E+S
S
S
E+S
A
A + I (I)
A +SU (I)
A
A
A + SU (I)
Phase I
Proof of concept
Nasdaq Approved Drugs
Not Relevant
Phase II
Jerusalem
Rehovot
Jerusalem
Jerusalem
Rehovot
Jerusalem
Haifa
Rehovot
Technology Transfer
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Technology Transfer Policies plays a crucial
role in the development of the industry
Different models of TT creat difficulties for
investors
University rules impose entrepreneurs to take
a leave of absence from the university. This
increases their personal risks.
In many cases investors and TT agencies are
speaking different business language.
Financing
Incubators
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Assist in shortening the ignition phase of
start-up
Serve as a good “school” on how to run
a company
In some few cases serve as a good
bridge for technology transfer (especially
those incubators which are being hold by
the Universities)
Financing
Incubators – cont.
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Lack of basic infrastructure needed for
biotechnology start-ups (clean rooms,
clean water, refrigerators etc.)
Incubation period is too short
The available resources are too small
Rules regarding share holding of
Universities and incubators are often
contradict
Financing
VCs
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VCs investment in the sector rose 124% in
2000 attracting 11% of total investments.
Total amount invested by Israeli VCs in 2000
was $124.4 million ($64M in 1999)
Total VCs investments in Israeli biotech
companies was $238 million ($135M in 1999)
All companies in the sample raised seed
money from VCs
Av. amount of investment $1.2 million
Financing
VCs - cont.
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Two specialized VCs set up private
incubators for their portfolio companies
Main fields if contribution:
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Recruitment of managers
Setting up advisory boards
Attracting other investors
Management
Financing
VCs - cont.
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VC market in the field is still under
developed. Seed funds are not enough
As a result there are market
imperfections
Office of the Chief Scientist
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Despite the restrictions most companies
are using OCS funds ($300K-2 millions)
Funding schemes:
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The regular scheme (up to 50% of R&D
costs for single company with royalties)
The magnet program (up to 66% of R&D
costs for a consortium of companies)
Very limited usage of EC funds
Business Model
Strong Team of entrepreneurs
Significant Innovative Idea
Pre - Clinical Tests
Royalties
Royalties
Phase I + II
Strategic Partner
Phase III
NDA + Marketing
After 2-3 successful drugs
Licensing / Selling of IPR
Phase III
Human Resources
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The no. of M.Sc and PH.d graduates
each year fulfill industry needs
The “excellent to industry” program is
very active.
Lack of experienced managers
Need to recruit managers from abroad
Number of Graduates by Faculty in
Sciences Related* to Biotechnology (1998)
2000
Ph.D.
M.Sc.
B.A.
1600
130
1,747
286
393
1200
938
Number of
graduates
800
400
0
Biology
Agriculture
Pharma. &
Medical Research
Total
Biotech
Engineering
Policy Recommendations
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Processes of technology transfer must
be simplified
Universities’ rules need to be modified in
order to decrease scientists’ personal
risks
Incubator system needs to be adjusted
VCs support to early stage companies
should be encouraged by governments
Policy Recommendations - cont
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Governments should encourage
excellent support services such as IPR
and regulation as these are vital for
companies’ success
Cluster oriented policies should be
adopted