Israel is home to
a successful high-technology
industry and a young and highly educated workforce including a talented
pool of physicians and biologists. This makes the country a natural
breeding ground for biotechnology development, as well as a leader in
Moreover, with a high percentage of graduates in mathematics,
physics and computer sciences, the industry is well placed to make an
impact in interdisciplinary technologies such as bioinformatics (the
creation of sophisticated machinery capable of sifting through the vast
amounts of molecular information accumulated by the Human Genome Project)
and proteomics (the identification of proteins through human tissue
analysis). Israel has also taken a world-leading role in cancer and
autoimmune disease research, as well as research into diseases of the
central nervous system.
- Birth of an Industry
- Biotech Today
- Raw Materials
- Government Aid
- Leading Companies
- Medical Advances
Birth of an Industry
Biotechnology is a relatively young industry worldwide.
The founding of Biotechnology General and of Interpharm - a subsidiary
of the Swiss pharmaceutical company Ares-Serono - in 1981 catalysed
the birth of Israel's biotechnology industry. For over a decade, these
two companies were virtually the only players in the field, despite
the active research taking place in the country's hospitals and universities.
As the high-tech wave gathered strength in the early 1990s, the first
biotech start-up companies began to emerge, aided by research and development
grants from the Office of the Chief Scientist at the Ministry of Industry
and Trade. Meanwhile, the government's "Magnet" program created
a framework for bringing together university-based scientists with already
existing companies to work on basic research aimed at eventual commercialization,
while its high-tech incubator program created a home for projects to
be developed in their earliest stages (see "Government Aid"
By 1996 there were close to 90 biotech companies, but
government funding was targeted only at the very early stages of projects,
and many were unable to survive the difficult market conditions in the
latter half of the decade. By the turn of the century, however, the
playing field was rich with companies performing the first and second
of the three clinical trials required by regulatory authorities in order
to get commercial approval for a drug.
There are about 160 biotech companies currently operating
in Israel, running the gamut of technologies from therapeutic pharmaceuticals
to diagnostics, bioinformatics and agricultural biotechnology. In 2000,
25 new companies were registered, $203 million were invested privately
in biotechnology-based business and three companies raised $140 million
on foreign stock exchanges. The industry employs 4,000 persons and sales
reached $800 million - up from $600 million the previous year - with
80% of biotech products going to export.
Yet despite the industry's growth over the past few
years, the country's combined sales of biotechnology-derived products
was just a small fraction of Israel's gross domestic product ($93 billion).
A number of factors may be responsible: the majority of biotechnology
companies are still at an early stage of development; there is a paucity
of commercially viable technologies; and many suffer from a lack of
Israel has an enviable pool of human talent and research
facilities, with more than 1,700 students a year graduating in the life
sciences. Life sciences represent about 35% of civilian research activities,
mainly at its seven universities (Ben-Gurion University, Haifa University,
Tel Aviv University, The Technion-Israel Institute of Technology, The
Weizmann Institute, Bar-Ilan University and the Hebrew University of
Jerusalem), four medical schools (Ben-Gurion University, The Technion,
Tel Aviv University and the Hebrew University) and two agricultural
research institutes (the Volcani Institute and the Hebrew University's
Faculty of Agriculture). Funds for life science research equal half
of the total research funding in Israel. All of the country's major
hospitals are involved in advanced biochemical research and some 60%
of the country's scientific publications are in biology and related
medical and agricultural fields.
In addition, Israel is well placed to make an impact
in interdisciplinary technologies, thanks to the mathematics, physics
and computer science training fostered by the universities and the country's
specialized military units.
Early-stage biotechnology companies need venture capital
(VC) financing to support years of expensive research and development
into new products and the subsequent clinical trials. Later they need
the bigger financial resources of the stock market to raise more capital
and the marketing muscle of multinational pharmaceutical companies to
bring their products onto world markets. While previously Israeli biotech
companies had little access to venture capital or foreign partners,
the situation has improved considerably in recent years. Today there
are about 20 VC funds active in Israeli biotechnology, each with capital
of between $10 million and $100 million. According to the IVC Research
Center, some 75 Israeli life-science companies raised $238 million in
venture capital in 2000, up from $135 million in 1999.
Clal Biotechnology is a $100 million VC fund, which
is supported by a consortium of institutional investors including Israel
Discount Bank, Hapoalim Investments and the holding company Clal Industries.
Koor Industries, another holding company, has joined forces with the
Swiss company Medabiotech to create a $10 million fund called BioMedica.
Makhteshim-Agan, a large agrochemicals concern, operates a $30 million
fund called MAH, for investment in plant genomics. In addition, many
VC funds that had previously focused on telecommunications, software
and electronics have started diversifying their portfolios by investing
in biotech companies.
Foreign investors have also begun taking an increased
interest in Israeli biotechnology. The American company Johnson &
Johnson invested in two biotech companies - Peptor and neurosurvival
Technologies, while multinationals Bayer and Baxter have invested in
the Medica II VC fund. America's Beckton Dickinson and Germany's Bayer
AG have become partners with the Israeli biotech companies GamidaGen
and Omir through the BIRD Foundation, a binational industrial research and development foundation
set up in 1977 by the governments of the U.S. and Israel.
Since the publication of a key report by the American
consulting company "Monitor" in 2001, which strongly recommended
that Israel turn biotechnology into a national priority, biotechnology
has become an increasingly important part of the government's aid programs.
The consultants had recommended that the country invest $52 million
to support research projects with commercial potential, as well as another
$45 million in two dedicated biotechnology incubators.
The government offers the biotechnology industry a
variety of programs for financial and technological support. The Office
of the Chief Scientist (OCS), of the Ministry of Industry and Trade,
is responsible for supporting and encouraging industrial research and
development, including biotechnology. Companies can apply to the OCS
for funding to cover their R&D costs, and are liable to repay the
loan only if the projects lead to commercially successful products -
a method that helps reduce the risk of engaging in cutting-edge research.
In 1990, under the aegis of the OCS, the national Biotechnology Committee
was founded to promote biotechnology research and entrepreneurial activities
and to advise the government on the industry's development. The committee
is made up of industry executives and academics in equal numbers.
The largest and most important of the OCS's ventures
is "Magnet", a program that sponsors consortia of companies
and universities to develop novel generic technologies, underwriting
up to 65% of their budgets. Examples of successful consortia are Da'at
- involved in bioinformatics and protein modeling - and PharmiLogi,
which advances technologies and forecasting systems aimed at developing
The OCS also sponsors high-technology incubators that
provide a supportive environment for scientists who lack entrepreneurial
skills to interest investors. Until recently, biotechnology projects
operated in general technology incubators, and were therefore subjected
to the same demands as software and communications start-ups. However,
the unique qualities of biotechnology, with its longer and more expensive
development cycle, have compelled the OCS to set up two specialized
biotechnology incubators that will host biotech projects for longer
periods, and provide up to $1.8 million in financing.
Outside the framework of the OCS, the Ministry of Industry
and Trade also gives grants and tax incentives for capital spending
on plants and equipment through its Investment Center. In addition,
the Ministry of Science, Culture and Sports has recognized biotechnology
as a "national project" for 2002-2007, allowing at least 10
different research groups to train manpower, strengthen research infrastructure
and allocate funds for academic biotechnology and medical research.
The Ministry also sponsors national centers for intermediate strategic
research that requires advanced instrumentation and skilled scientists,
such as protein purification and microsequencing, transgenic plant and
animal technologies, genomic technologies, gene therapy and high-throughput
Teva Pharamceutical Industries is Israel's leading
drug company and one of the world's largest manufacturers of generic
pharmaceuticals, due to an aggressive acquisition and product development
program. In addition to generic drugs, the company spent 10 years developing
its first proprietary drug, Copaxone, for the treatment of multiple
sclerosis. The injectable drug has the efficacy of rival beta interferon
treatments, but with less disturbing side effects. Teva has also invested
in start-up biotechnology companies including Peptor, which has developed
a drug to halt the development of type-1 diabetes, thereby reducing
the need for a daily insulin injection, and in Proneuron Biotechnologies,
whose work in immune system cells could lead to a recovery for people
paralyzed by injuries to the spinal cord. In addition, Teva is developing
experimental proprietary treatments for Parkinson's disease, Alzheimer's
disease, epilepsy and other conditions.
Bio-Technology General Corp. develops, manufactures
and markets products for human health care. It was founded in the mid-1980s
and spent almost 15 years in research and development - investing over
$100 million - before it saw revenues. Today it has many products on
the markets of the U.S., Europe and the Far East, including a genetically
engineered growth hormone called Bio-Tropin and Bio-Hep-B, the first
recombinant hepatitis B vaccine to be approved anywhere in the world.
The company continues to actively invest in drug development, and has
a number of promising products in its pipeline.
D-Pharm employs proprietary technology that re-engineers
existing drugs rather than creating new ones. The company begins with
an active ingredient already known to be effective and then modifies
it to make it work more efficiently and with less side effects, thus
enabling physicians to reduce the dosage. At present, the company is
developing a drug called DP-VPA for treating epilepsy, bipolar disorder
and migraine prophylaxis and is working on other drugs for the treatment
of cerebral strokes.
XTL Biopharmaceuticals develops novel therapeutics
to treat life-threatening infectious diseases, based on human monoclonal
antibodies and small-molecule drugs. It is currently focusing on therapeutics
for hepatitis B and hepatitis C viruses, both on its own and in collaboration
with other biopharmaceutical companies. XTL's Trimera technology may
be used to develop models of human diseases for the early stages of
preclinical testing. One of XTL's most important clients for Trimera
is the American pharmaceutical company Eli Lilly, which is using the
model to test an anti-hepatitis C drug.
Compugen, a bioinformatics and proteomics company,
was founded in 1993 by three graduates of an elite military intelligence
unit. The company's technology platforms help scientists gather and
process the huge amount of data generated by the Human Genome Project
and to develop new drugs more quickly. In addition, Compugen offers
other computational solutions to address the needs of pharmaceutical,
biotechnology and life sciences companies in their search for lead compounds
that could act as the basis for new and more effective pharmaceuticals.
Its customer base includes international pharmaceutical concerns Eli
Lilly, Merck, SmithKline Beecham Pharmaceuticals, novartis and Millennium
Keryx Biopharmaceuticals, founded in 1998, uses its
KinAce bioinformatics drug-discovery platform to target protein kinases,
thereby generating potential new pharamceutical therapies. By targeting
specific portions of protein kinases, the company has produced 14 lead
drug compounds. One drug currently under development is KRX-101, which
will treat diabetic nephropathy, a condition which leads to kidney failure
and is one of the most common complications of type-II diabetes. Another
is KRX-123, which is targeted at hormone-resistant prostate cancer,
a condition for which there is no effective treatment today.
Academic research funds in the 1970s and 1980s tended
to fund pharmaceutical and biotech-oriented research, but a few companies
developed medical equipment. The 1990s saw the emergence of many such
companies and a growing amount of private equity capital to invest in
it. Elscint developed medical imaging tools and Lumenis grew to be the
world's largest maker of laser instruments for cosmetic skin surgery,
as well as for those used in surgery on the teeth, ears, nose and throat.
The industry is also seeing an influx of second-generation
entrepreneurs from the software and telecommunication industries who
are looking to apply their skills in other places. Given Imaging has
developed an encapsulated miniature camera that is swallowed by the
patient. The capsule travels down the small bowel, sending images to
a screen from which doctors may accurately diagnose gastrointestinal
disorders and diseases, without the need for invasive exploratory surgery.
TransScan's patented technology detects breast cancer using non-invasive
methods, and Odin Medical Technologies has a unique MRI (magnetic resonance
imaging) platform using small, movable scanners. Applied Spectral Imaging
combines coventional imaging and spectroscopy to reveal information
not normally visible by conventional imaging systems.
There have also been significant advances in non-invasive
medical procedures. Glucon is developing a technique for measuring blood
components that could lead to a home-based, continuous monitoring of
glucose for diabetics, while OrSense's sensor technology measures parameters
like blood glucose, hemoglobin and cholesterol by means of a finger
probe. Inventis has a device for the non-invasive treatment of male
In the area of cardiac surgical devices, InStent -
manufacturers of devices which hold open previously blocked heart arteries
- merged with the American company Medtronic; Medinol, another cardiac
stent company, was acquired by Boston Scientific; and Biosense, a maker
of cardiac electrophysiology mapping and ablation systems was acquired
by Cordis, a division of America's Johnson & Johnson.
NESS (Neuromuscular Electrical Stimulation Systems
Ltd.) develops and manufactures unique systems for the rehabilitation
of impairments resulting from disorders of the central nervous system.
It recently received FDA approval for its noninvasive, neuro-prosthetic
device, the Handmaster. This medical device helps activate the impaired
or paralyzed hand of a person who has suffered a stroke through low-level
electronic pulses that stimulate the neuromuscular system and activate
the muscles of the hand and forearm to restore natural movements to
Sources: Ministry of Foreign