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Global Business Update Israel Drives Middle East Biotech By Gail Dutton, contributing editor I srael has been called, accurately, a nation of start-ups. With its scientifically oriented population and entrepreneurial drive, the nation is driving Middle East biotech. Approximately 60 percent of Israel's life sciences companies focus on medical devices, while about 35 percent focus on biopharmaceuticals. Typically, 40 to 60 biotech companies are founded each year. Per capita, Israel has the most biotech startups in the world. Entrepreneurs make up 6.4 percent of the population. Israel has one of the highest concentrations (1.45 percent of its population) of scientists in the world — a percentage that was enhanced by the 1990s' influx of Soviettrained scientists and engineers. To put this in context, the percentage for the U.S. is 0.81, according to CORDIS, the EU's Community Research and Development Information Service. BIOPHARMA PRESENCE GROWS Benny Zeevi, co-chairman of the Israel Advanced Technology Industries (IATI), characterizes the Israeli life sciences industry as "relatively young, rapidly growing, and exuberant." Currently, more than 800 life sciences companies operate in Israel, and nearly two-thirds are less than 10 years old. More than a third already generate revenue. The Israeli life sciences industry is dominated by the medical technology industry, but the pharmaceutical field is growing. In March, ClinicalTrials.gov reported 4,013 clinical trials were currently underway, up from 3,000 a few years ago. (This figure includes trials conducted in Israel by international companies.) That's 70 percent of all the clinical trials conducted in the Middle East. 42 LifeScienceLeader.com TEVA Pharmaceutical Industries dominates Israel's list of biotech success stories. Founded in 1901, TEVA has become one of the world's leading pharmaceutical companies, developing innovative specialty medicines as well as generic and OTC products, active pharmaceutical ingredients, and new therapeutic entities. It actively partners with the growing number of biotech startups. Many of Israel's biopharma companies have grown beyond the one-man-anda-lab stage. About 30 of the companies are midsized and are beginning to make their marks. For example, Protalix Biotherapeutics is using its proprietary plant-based expression system to develop enzymes used in treating Gaucher disease. Its product, Elelyso, recently received regulatory approval in the U.S. and Israel. Five other compounds are in the pipeline. The most advanced is entering Phase 2 trials. Another firm, Gamida Cell, expects to launch its stem-cell-based leukemia therapy, StemEx, in 2013. Five products are in its pipeline. Cell Cure Neurosciences is working to develop OpRegen for agerelated retinal degeneration. Human trials are ongoing. Medical device patents comprise the largest segment of Israel's life sciences portfolio. Overall, drugs discovered August 2013 in Israel — though often developed elsewhere — account for approximately $25 billion in annual sales, notes Ruti Alon, general partner at the venture capital firm Pitango and IATI conference co-chair. LATE-STAGE FINANCING NEEDED Funding is, perhaps, the biggest challenge for biopharmaceutical companies in Israel and throughout the world. Israel boasts 25 to 30 active VC firms but only about 10 actively invest in biopharma. One, Pitango, has $1.4 billion under management and includes 16 life sciences companies in its broad portfolio. Additionally, in 2011, Merck Serono launched the Merck Serono Israel Bio-incubator Fund. The purpose, according to Merck, is to "accelerate the successful development of entrepreneurial start-up companies." It offers seed financing and the opportunity for researchers to use a dedicated part of Merck Serono's Israeli research and development center, Interlab, for their own projects. Over a seven-year time span, Merck Serono plans to invest a total of 10 million EUR into this fund. To help bridge the funding gap, the Israeli government established the Heznek venture capital fund in 2002, with a focus on life sciences, software, and communications. The organization matches the capital funding secured from