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Global Business Update outside investors or investment entities, providing matching funds peak at 50 percent of the total capital requirements, and do not exceed 5 million NIS (New Israeli Shekel, the currency in Israel) — about $1.3 million. The fund invests in companies that are less than six months old with less than 1 million NIS in expenses. The government's investment is exchanged for shares in the company, which the matching investor may purchase at the original price (plus interest) during the first five years of the investment. Nonetheless, like most young biotech companies, Israeli firms need additional financing. As Zeevi says, "To become a global company takes time and a lot of money. We have almost no latestage funding." Companies need this influx of cash to take them all the way to commercialization or, at least, to the point at which licensing or mergers or acquisitions become feasible. Among firms funded by venture capital, "For pharma/biotech companies, licensing is the most probable funding and exit strategy," Alon says. "For medical device companies, the most common exit is via mergers and acquisitions." The exit strategy for medical devices, however, is shifting to licensing as the costs of trials leading to commercialization increase. "The structure of licensing deals gives the acquirer better control in validating the value of the assets it is interested in buying," Zeevi explains. Acquisitions may evolve from those licensing agreements. For relatively young companies, the stock markets are virtually closed, Alon says. Currently, NASDAQ lists nine Israeli biotech or pharmaceutical companies. The Tel Aviv Stock Exchange (TASE) lists approximately 60 biotech companies. GOVERNMENTS OFFER INCENTIVES The Office of the Chief Scientist (OCS) is a good starting point for companies interested in investing in Israeli biotech. That office is a function of Ministry of Industry, Trade, and Labor, which is charged with executing government policy to support industrial R&D.; To attract biotech specifically, the government is establishing a new biotech incubator to help attract large, international pharmaceutical companies to Israel. This bio-incubator will join the more than 20 incubators or accelerators in Israel. "But not all include biopharma," Alon points out. Israeli biotech can count on "significant government support" from that office, Zeevi says. Multiple programs and incentives are available. "But," Alon cautions, "that is mainly initial funding. Companies must develop additional funding sources." Much of the support comes in the form of tax incentives for local and foreign investment that significantly reduce the corporate tax rate. "These incentives for approved enterprises are included in the Encouragement of Capital Investments Law, which took effect January 1, 2011," Alon says. As in the United States, Israel levies taxes on the global income 44 LifeScienceLeader.com August 2013 of companies incorporated there, and on the income of foreign companies operating there. However, it has tax treaties with many nations, including the U.S., to avoid double taxation. The corporate tax rate for 2013 is 25 percent. Income tax rates on individuals increased January 1, 2013, and the tax burden for individuals and corporations appears to be in flux. STRONG INDUSTRY/ACADEMIC PARTNERSHIPS ARE NORMAL Israel's young biotech industry is supported by strong research institutions. The seven universities there excel in neurology, oncology, vaccine, and stem-cell work. Israeli scientists pioneered the in-vitro differentiation of human embryonic stem cells (hESCs) and their genetic modification, which led to a cell line representing Lesch-Nyhan disease. "We don't have legal issues that halt stemcell research in Israel," Zeevi points out. Most of the universities have ties to the industrial parks that are home to R&D; centers and laboratories for some of the world's leading life science companies. Additionally, an OCS magnet program forms consortia composed of university research departments and high tech companies in multiple fields, including biotech. Consequently, investigators are cognizant of requirements for scale-up and commercialization and are likely to consider them during the early stages of project design. Each university handles its own technology transfer program. The Hebrew University of Jerusalem, Tel Aviv University, Technion Institute of Technology, and the Weizmann Institute of Science are most active in research. "The Weizmann Institute of Science and Hebrew University are very successful," Alon says. Hebrew University, for example, has discovered several blockbuster drugs. They include Exelon, developed by Novartis to target Alzheimer's disease, and Doxil, commercialized by Johnson & Johnson to target cancer. At the Weizmann Institute, scientists have developed drugs to treat multiple sclerosis, Alon says. The Weizmann Institute has registered approximately 1,400 families of patents since 1959 and spun out 42 companies — half of them since 2000. According to the Worldwide Intellectual Property Organization's (WIPO) list of educational institutions filing patents, Hebrew University ranks 23rd in the world in the number of total patent filings in 2011, with 52. Tel Aviv University holds 33rd place, with 43 patent filings. In terms of academic ranking, Hebrew University, Tel Aviv University, Technion, and Bar-Ilan University are among the world's top 400 universities, according to the British weekly magazine, Times Higher Education. Consequently, corporations working in Israel have ready access to innovative employees trained at world-class institutions.