Medical Device Daily Contributing Writer
ZICHRON YAAKOV, Israel — “People [in Israel] are making amazing progress within a shorter timeline and at lower budgets than in the U.S.,” said Dr. Jacob Dagan, one of five managing partners in ProMedical Capital Group (ProMed; New York). “Many companies successfully pass the feasibility test stage, getting to proof of concept within 12 to 18 months, which is amazing.”
Dagan cited EndoGun Medical Systems (Kiryat Shmona), one of ProMed Group’s Israeli portfolio companies, as an example, noting that the 2-year-old firm with a budget of less than $2 million developed a product, tested it and got FDA approval to market in the U.S.
“Company valuations in Israel are still realistic, compared with American companies, and we believe that our knowledge and experience contribute real value,” he said. “In the past, investing in Israel was difficult because the ego of entrepreneurs led them to believe that they could do it all on their own. Things are very different today.”
He said ProMed’s aim is “to get involved in the Israeli medical device arena with our money, with the future fund’s money to be launched in 2007, and/or in collaboration with existing Israeli funds.”
Dagan said the four companies he and his partners are involved with “are our entrance ticket to this market. We bring a special knowledge of the medical industry in the U.S. We know the channels, who to approach. We have the contacts and we also have the experience in making investments and developing contacts with institutional investors.”
The biographies of the founding partners read like a Who’s Who of the biomedical industry.
Abeles, a physician, is a leading figure in the global pharmaceutical industry and was a clinical research executive at Pfizer and Revlon Healthcare . As a medical securities analyst at Kidder Peabody, he was the first physician to act as a consultant on the New York Stock Exchange. He is currently general partner at Northlea Partners and president of the consulting company Medvest (Fort Lauderdale, Florida).
Evans is a respected cardiovascular expert who created a chip based upon which he recently raised $5 million for his own angio-imaging start-up, Prisma Medical Technologies (New York) now in human trials. He has vast experience as a liaison in the VC world with a number of healthcare giants, including Johnson & Johnsson; Biosense Webster , a J&J subsidiary conceived and birthed in Israel; Medtronic (Minneapolis); Guidant , now part of Boston Scientific ; Impulse Dynamics; and Atricure .
He told MDD that at one point he realized that “as an MD, I can help one person at a time, but as a VC in medical devices, I can help many hundreds or thousands at the same time.”
Dagan, a graduate of the Technion-the Israel Institute of Technology , returned to Israel in 1975 with a PhD in nuclear physics/biomedical engineering from Columbia University to spearhead the introduction of nuclear imaging in medicine. He founded the department of biomedical medicine at Sheba Medical Center (Tel-Hashomer), which he headed through 1981, while taking a professorship at Tel Aviv University to start the biomedical engineering program there.
In 1981, he became the chief advisor to the Israeli government for approval and purchase of medical devices and equipment, until he was wooed back to the U.S. in 1984 by STI Laser Industries (Neve Sharet), when it went public, to head new business development via development of laser-based medical equipment. Among other business endeavors, he foundedBergen Medical Imaging Centers , which was sold in 2001;HeartGuard and Medical Service Options .
David Milch, a Harvard-trained MD, formed Davco Consultants (1988) to capitalize on his activities in technology and business. Milch became a leading investor in public and private medical companies through his activity in identifying and helping breakthrough medical technologies transition into global markets.
He served as an advisor and held equity positions in Advanced Medicine (then Theravance ) until it went public in 2005; two Alfred Mann companies founded in 1993 — MiniMed (acquired in 2001 by Medtronic) and Advanced Bionics (acquired for $2 billion in 2004 by Boston Scientific); among others. Milch previously was principal of Bermil Industries , a closely-held family business, which was partially acquired by a public company in 1989.
Attorney C. Leonard Gordon, the group’s legal expert, has 25 years’ experience in building regulatory and marketing infrastructure for life science ventures — e.g., Laser Industries dealerships (sold out for $1.5 million) in 1981; and, the German laser company MBB (Munich); and as CEO of implantable device company NMT Medical .
In 1988, Gordon approached Dagan to launch a start-up for non-invasive radiation-free breast cancer detection and imaging device, Biofield (New York). Gordon’s work with leading law firms and FDA regulators is vital to the critical aspects of intellectual property identification and protection, and the approvals needed for marketing of medical devices.
Dagan said, “We found excellent opportunities among the young companies that had had difficulty approaching venture funds or securing enough finance from post-angel stage investment; companies that had passed proof of concept stage, but were struggling to raise funds to survive forward movement. Our investment would bring them to the stage of clinical trials, and help market them to further investment. We were not worried about investing in companies that do not appear on the local funds’ radar.”
The partners were not hesitant to invest their own money and intend also to look for institutional investors, as well as angels, or private funds, sparking an interest in investing in medical device companies in Israel.
ProMed Capital’s first investment was in Endogun Medical, a 2005 graduate of the Meytav Technological Enterprises Innovation Center incubator (also Kiryat Shmona).Endogun is developing tissue anchors introduced by minimally invasive surgery for closure and fastening of internal tissues. The first application is the EndoFast Reliant product platform, focused on the two largest urogynecology markets, and has FDA approval for preventing pelvic prolapse by.pelvic floor reconstruction and for stress urinary incontinence in women.
Milch noted, “The company couldn’t find additional investors because they thought that it was at too early a stage or were afraid that of getting involved in this field. We think that those funds that refused to invest have missed out.”
ProMed put in $220,000 of the $913,000 in this round. The round was led by previous investors Pontifax, the investment fund headed by Eli Hurvitz, chairman of Teva Pharmaceuticals , along with HaPoalim IBI Underwriting and Investments.
Endogun plans to advance the development of its products in a number of indications and launch clinical studies and advanced regulatory processes.
The company previously obtained about $1 million in financing from Meytav, Biomedix Incubator, which owns 67% of Meytav; HaPoalim IBI Underwriting and Investments; and the Office of the Chief Scientist, which advanced the company $300,000 via its incubator program.
Althera Medical (Tel Aviv) was ProMed’s second investment, kicking in $1.5 million. The company is in Phase I clinical testing in Israel for the first application of its Diffusing Alpha-emitters Radio-Therapy (DART) technology, a device to destroy solid cancers. The Althera approach is the first to develop an optimal distribution paradigm to deploy the potent short ranged alpha particles to the tumor mass, aimed at total eradication or de-bulking of solid tumors prior to post irradiation deployment of chemotherapy.
Dr. Gideon Shichman, Althera founder and CEO, told MDD that with more than 7.5 million new cancer cases annually and some 12.5 million cases in the 5-year survival population, the patient pool for Althera therapy exceeds 20 million a year, growing at 3% annually. He said target price projection is $7,000 per DART treatment. Reaching only 0.1% of all DART candidates presents $200 million in gross income.
ProMed Capital’s third investment, in HDHMedical (Haifa), amounted to $1.5 million. The company has developed the Hermetic Docking Head (HDH) vascular device, supported by surgical instruments for a suture-less open surgical procedure to treat aortic and peripheral aneurysms.
The HDH device connects any standard vascular graft to a patient’s blood vessel creating leak-proof anastomosis in under two minutes, an order-of -magnitude improvement.
“HDH reached the human trials stage quite quickly, but they don’t have the necessary experience of regulatory and licensing procedures to be able to move the company forward. This is where we come in,” said Dagan.
Nicast is the fourth company ProMed has been involved with. Dagan and Milch were invited to join its board — Dagan appointed chairman — to steer the company into the medical device market.
The company produces matrices that mimic biological tissue and are intended for artificial replacement organs. Nicast is developing a nano-fiber stent for treating coronary and peripheral vascular diseases, technologies Dagan described as “fantastic” and “poised to revolutionize surgery.”
He noted that Israel Infinity Venture Capital and Kanit Hashalom Investments of the Azrielli Group already have invested $4 million in the company, with Infinity holding about 25%, Kanit about 45%, and the rest held between the founders and the employees. “We are proud to be joining them, and see a great future for this company,” said Dagan.
In parallel to the venture capital investments, at the beginning of November ProMedical Capital and the Israel Ministry of Industry, Trade and Labor commercial delegation held a joint road show in the U.S. for 14 private companies in the medical device sector, where they presented the portfolio companies together with potential investors and strategic partners.
Dagan formed a company to manage these presentations — Israel Life Science Road Show (ILSRS; Tel Aviv) — because the response was so overwhelmingly positive, he said.
Over a four-days span, the Israeli group traveled from Virginia to Boston to New Jersey and New York City, and were introduced to close to 300 potential investors, strategic partners and service providers. Success of the “show” prompts preparation for another on the West Coast, targeted for April, Dagan said.