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Lack of infrastructure for later-stage development holds Israeli biotech back

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By Alfred Romann
Staff Writer

TEL AVIV, Israel – Israel has plenty of innovators and researchers and is pumping out new innovative ideas and research at record speed, but a lack of infrastructure may be holding the industry back and preventing the emergence of companies of global stature.

"We are seeing a lot more innovation here that we can come close to exploiting or making full use of," said David Malek, chief business officer at Israeli company Biolinerx Ltd. "One thing that is really lacking here is an ecosystem, or whatever you want to call that. There is a lot of infrastructure for the earlier stage.

"It is slowly changing in some ways. For example, we are seeing a lot of big pharma that are very active here. Each one of them has a very different vehicle to engage early stage opportunities. We are seeing more than we saw even five years ago," Malek told BioWorld Today, on the sidelines of the MIXiii Biomed 2017 conference last week.

The same entrepreneurial drive that makes it possible for Israeli companies to pump out new and very innovative projects faster than almost anywhere else in the world may also be playing a role in holding back the development of large companies of truly multinational scale. Perhaps the only large company in the space is Teva Pharmaceutical Industries Ltd., best known for its generics.

In other large and well-developed markets, "you have this richness of options or expertise. You want to do a unique formulation, they have that. You want somebody to invest in you when you only have an idea or a target, well they have investors who will do that and then they'll graduate you to investors who will [support] early clinical and then they'll graduate you to Nasdaq," Malek said. "Here we don't have that richness in that sense yet. That is where I see the growing up of the environment really has to happen."

The good news is that "we've passed the point where most people recognize it, which is an advancement."

All those entrepreneurs are supported by peerless research – Israel produces four times as many patents per capita in the life science space than the U.K. – and plenty of government support for young companies. For decades, Israeli entrepreneurs have been building companies and selling them at relatively early stages with significant success but not taking them into the later stages of clinical development, preferring to leave that to multinational buyers.

ENTREPRENEURIAL SPIRIT

Israel has several basic building blocks to facilitate life science innovation, said Aharon Aharon, CEO of the Israel Innovation Authority, citing medical records for 98 percent of the population that go back almost 20 years, as well as developed knowledge databases and untapped human resources.

"We have the entrepreneurial spirit that is the basis of this country," Aharon said.

In 2016, there were 64 venture capital-backed life sciences deals that added up to $470 million, about 15 percent of all the venture capital invested in the country, according to research from the IVC Research Centre. That's just the tip of the iceberg. There are also investments from private equity firms, private and government-funded incubators, government grants that are relatively easy to access and more.

There are hundreds of young companies in Israel with unique technology and many of them were on display at MIXiii Biomed. Among them were the winners of the Biomed Startup of the Year competition, which included Betalin Therapeutics Ltd., which developed technology to implant cells in the pancreas that produce insulin for patients with diabetes.

Multinational firms such as Novartis AG, with which Biolinerx has a partnership, are often excited by the level of innovation and the approaches on display in Israel.

Universities in the country produce plenty of research, much of which can be turned into viable and marketable products. In that, Israel has plenty of experience: Two out of the three oldest university-based technology transfer companies in the world are here. One is Yissum, which is owned by the Hebrew University of Jerusalem and is the third tech transfer company ever set up, in 1964. The first one was in Wisconsin in the U.S., and the second was Yeda, at the Weizmann Institute, also in Israel.

The amount of sheer innovation coming out of Israel is truly impressive. "We need to exist. This is a survival mechanism, the fact that we are so flexible, so quick with ideas, so innovative. That's what keeps us alive here, not only financially but literally," Yissum's vice president of marketing, Dana Gavish-Fridman, told BioWorld Today. "There is a real understanding from a young age that our kids need to be quick, they need to innovate.

"The first challenge is getting that seed money for the proof of concept . . . for the scale-up. These things that are difficult when you only have a proof of concept and a patent," Gavish-Fridman added. "That's why we have our own funding. We have seed money. We also have VCs.

"The idea really is to get that extra funding for the scale-up, for the proof of concept for the early stage technologies and then it would be licensed out under better terms. We'd be launching a startup that is a lot more mature," she said. "Everybody is looking for the mature stuff; it is easier that way."

In the pharma space, the process has led to the development of a couple of blockbuster drugs. One is Novartis' Exelon (rivastigmine) for Alzheimer's disease and dementia and the chemotherapy Doxil (doxorubicin HCI liposome injection) from Johnson & Johnson's Janssen unit. Both of those drugs have exceeded $1 billion in yearly sales.

Technology transfer companies like Yissum combined with government programs that fund very early stage and risky ventures, along with incubators, and private funding combine to create a very nurturing ecosystem for entrepreneurship and the early development of companies. After that, things get tricky.

"The good companies manage to raise the funds and find the investors. And yes, it is challenging. It has always been a challenge. That's life, that's business life," said Gavish-Fridman. "What you need to have present is a really good team and a really good technology and then life becomes easier."