Medical Device Daily Contributing Writer

ZICHRON YAAKOV, Israel — Israel has become a veritable safari for hunting investment opportunities, complete with dangerous terrain. But many investors, veteran, new and potential, have expressed concern about how much impact Israel's emotion-embroiling politics, social woes, terrorist attacks and periodic wars have on technology business development — compelling question.

So the recent Central Bureau of Statistics ' (CBS) summary report, showing the limited economic impact of the second Lebanon war in July, was received with a sigh of relief by people who put their money and their due diligence to invest in and partner with the human-based Israeli medical technology sector.

CBS confirmed that the war that devastated the north of this postage stamp-sized country, and basically put tourism into cardiac arrest, had not significantly affected overall economic activity and had no significant effect on medical technology development — outside of the direct hits on personnel or along the value chain. In fact, the surge in the number of hospitalized patients spurred field testing of medical devices and other treatments that accelerate wound, burn and bone healing, and recovery from post-traumatic stress disorder.

During 3Q06, output and exports of medical devices, medical electronics and biotech/device hybrids rose by an annualized 25%.

The quarterly report from the IVC Research Center (Tel Aviv) showed a 13% increase in investment from 3Q05. Some $381 million was raised in venture funding by 87 Israeli high-tech companies. One-third ($115 million) went to life sciences involving 22 companies, with six raising more than $10 million in the round.

The sector's average was more than double the average company financing round of $4.37 million, IVC director of research Efrat Zakai told Medical Device Daily.

Zeev Holtzman, chairman of both IVC Research Center and Giza Venture Capital , said, “This signifies that investors continue to see stability and credibility in Israeli high-tech, despite the war and despite other political upheavals, a fact which is also reflected in the slight increase in the share of foreign investment during the third-quarter period.“

Life science companies nearly doubled the $68 million raised in the previous quarter, even though total investment decreased by 6%. “This is the highest quarterly total for life sciences since the fourth quarter of 2004, when 35 life sciences companies raised $130 million between them,“ Zakai said.

One interesting approach focusing on the medical device sector is found in Beylard Strategic Consultants International . Richard Serbin, a 20-year veteran of device and big pharma expertise, set up the company with Beyla Potash, a cognoscenti of the local investment community, “to help companies get over impasses and avoid running into them.“

Serbin is former FDA chief counsel for Johnson & Johnson , and a senior executive at J&J, Revlon , Schering-Plough and other firms. He has served on the boards of 17 U.S. and international biopharma and device companies, including Bio-Imaging Technologies. He co-founded or led five biomed start-ups to successful exits, including Optigenex (New York).

Serbin told MDD that Beylard combines more than 40 years of experience in working with complex issues facing the researchers, developers, logistics managers and marketers of healthcare products and technologies — “just what is missing in Israeli med-tech. We help to identify and direct the client company onto the track that will bring the company from its current needs-and-wants status through to a defined growth objective, harvest or successful exit.“

Serbin said, “Beylard provides a full service, from refining the vision, to defining landmarks to attain each goal, including secure funding for its clients, identifying strategic partners for their product development, manufacture and distribution, based on an understanding of optimal geographic and inside market-segment criteria.“

While there are many consultants in Israel, Serbin said that Beylard “has special expertise in overcoming the barriers to success in the medical device arena. And, we always assign a senior partner to personally monitor each aspect of the assignment, one who most fits the needs of the client and company, and follows the project as a true hands-on project manager. This in and of itself differentiates our services from those typically offered by others.“

Potash said, “We select the client as much as they select us. After validation of its belief in the project, which is without charge, Beylard's compensation package includes options in the client company, reinforcing its commitment.“

Also showing that the trend of growing investments and investment-hunting in Israel appears to have reached a higher plain is the ProMedical Capital Group (New York), which in the past year began raising a $100 million-$150 million fund focused on early-stage Israeli medical device firms. This move places the ProMed Group at the head of a small elite of investment funds focused on Israeli med-tech start-ups.

ProMed's five managing partners — Dr. Jacob Dagan, Dr. David Milch, Dr. Steven Evans, Dr. John Abeles and C. Leonard Gordon (a physicist, three physicians and a lawyer) reported the funding of the first three Israeli start-ups, Althera Medical (Tel Aviv), EndoGunMedical Systems (Kiryat Shmona) and HDH Medical (Haifa).

“We decided on medical devices in Israeli because this is the best investment strategy for us,“ Dagan told MDD. “We combine 100 years of intellectual, business, marketing and financial expertise, with direct experience at all stages of life science companies from start-ups through public entities, both in the U.S. and in Israel, especially in the medical device arena. By combining our perspectives and our purses, we can see an opportunity through to a real profit for ourselves and our portfolio companies.“

He added: “There is a lot of money in the U.S., but profit-taking has been limited by high company valuations, limited harvest and exit opportunities. We find that Israel is more 'opportunity dense' than Europe and the U.S., and Asia is too far away, geographically and in mentality also.“

The team members — who collaborated with one other in various projects over the years — came to the realization that the leverage added by their combined strengths could be a key to broader success.

Israel is seen by many as the best hunting ground for the most-prepared teams, to find the most-likely-to-succeed device start-ups, to help them through growth impasses, to find secondary funding, and exits, or cultivate strategic partnerships, M&As, or to bring them into the global giants.

ProMed was formalized in 2005 and started investing its own funds in less than one year, selecting four Israeli companies by intensive hands-on due diligence: Althera, HDH and Endogun, and, most recently, Nicast , with three others under consideration while the hunt continues.

“We came here considering the possibility of collaborating with local funds but quickly found that we could operate without a local partner,“ Dagan said. “There are some excellent resources here, but not so much in medical devices. Israel has a very strong academic framework, first-rate medical centers and various incubators that help start-ups get up to a point worth investing in.“

Editor's note: Tomorrow, a closer look at ProMed's partners and the companies in which they've invested.

No Comments