BioWorld International Correspondent

ZICHRON YAAKOV, Israel It may be that the sharp fall from virtual reality has cast a better light on the life sciences, according to a report by Kost, Forer and Gabbay Ernst and Young (Israel), which described 2001 as “a successful year” for the life sciences, projecting a “continued trend in the coming years” contingent on “growing government support.”

Growing government support in Israel is hardly assured, however, in the continuing budget crunch.

“Despite the economic uncertainty of the past year,” private investments have been “increasing, indicating growing confidence in the life sciences,” the report stated. In 2001, $151 million in capital was raised for biotechnology firms in 29 rounds, the rest of the $293 million raised for the life sciences going to medical technologies. This total was up 43 percent from 2000 and 139 percent relative to the $122.6 million raised in 1999.

One worrisome trend was a substantially reduced ability of start-ups to attract seed investments, which showed up in numerous start-up failures in 2001, an estimated 500 closures, or 20 percent of all young technology companies, according to a report published by the Union of Electronics and Information Industries presented at its annual convention in Tel Aviv on Jan. 6.

Human capital in the life sciences improved, with a 2 percent rise in salaries, compared with a 10 percent to 20 percent decline in the high-tech and traditional technology fields. There also was a substantial increase in the number of students registering for life sciences degrees.

In contrast with private capital investment, fund raising from the public declined sharply compared with 2000 a peak year wherein $399 million was raised in eight issues compared with $67 million in four issues in 1999.

In 2001, $257 million was raised from the public in two issues (Given Imaging Ltd. and Taro Pharmaceutical Industries Ltd.).

Share prices of the 19 Israeli biotechnology and medical device companies listed on stock exchanges in the U.S., Europe and Israel dropped sharply. The E&Y biotechnology index dropped 11 percent in 2001, along with the Nasdaq index, with two notable exceptions: Rehovot-based Pharmos Ltd. rose 53 percent and Kibbutz Kakum- and Hawthorne, N.Y.-based Taro Pharmaceutical Industries gained 29 percent. Prominent declines included Rehovot-based XTL Biopharmaceuticals (LSE:XTL; 66 percent), Ashdod-based Healthcare Technologies (NASDAQ:HCTL; 36 percent) and Jerusalem-based Keryx Biopharmaceuticals (NASDAQ:KERX; 30 percent).