Just over two years ago we took an in depth look at the
biotherapeutics sector of Israel’s biotechnology industry. We recently
revisited this sector to report on the progress made. Our original
article highlighted the challenges faced by Israel's 160 active
biotechnology companies and the government's support of them.
The Good News: Investments on the Rise
Impressive Achievement
In 2004 Aaron Ciechanover and Avram Hershko from the Technion–Israel
Institute of Technology were awarded the Nobel Prize for chemistry,
notably contributing to Israel's international biotech prestige.
Their research in discovering the way cells destroy unwanted proteins
is paving the way in cancer research, leading to therapeutic advances.
The Israeli biotechnology industry survived the 2000–2003 economic
downturn and is now on the rise. During 2003 venture capital investments
in Israeli life science companies increased 13% to reach $90 million.
The Bad News: Challenges Remain
While Israeli ingenuity has been able to transform a wealth
of scientific knowledge into commercial successes in the telecom, semiconductor,
IT, and medical device industries, this has not yet happened in the
biotech industry. Israeli biotech still faces the same challenges we presented
two years ago: a myriad of R&D stages and clinical trial
phases, suitable local infrastructure, difficulty raising capital, and
a shortage of qualified management.
Proactive Government Support
To address these ongoing challenges, the Israel's Office
of the Chief Scientist of the Ministry of Industry, Trade and Labor (OCS)
has strategically decided to give preference to establishing a solid Israeli
presence in international biotechnology. This translated into two significant
initiatives: (1) providing generous budgets for biotech projects
supported by the OCS. Whereas OCS-supported projects are typically
budgeted at 20%–40%
of their value, biotech companies are budgeted at 50%, and (2)
setting aside dedicated funding to advance biotech incubators.
Getting It Right the Second time Around
During the time our first article was written, the OCS,
acting on recommendations of the government-sponsored Monitor Report,
initiated tenders to establish two business incubators dedicated solely
to biotech start-ups. The aim was to bridge the gap between the abundance
of IP emerging from Israel's universities and the low success rate
in transforming this valuable know-how into viable businesses.
This venture
failed when the two groups chosen to establish the incubators pulled
out at the last minute due to the realization that the classic technology
incubator program would not work for biotech companies.
This failure called for a new business model, one that would better
address the issues of difficulty in raising capital and lack of experienced
management. To meet this challenge, BioLineRX was founded in 2003 by
Teva, Hadassit (Hadassah Medical Center's technology transfer company),
Giza Venture Capital, and Pitango Venture Capital.
To date, the founders have invested $15 million in BioLineRX.
BioLineRX's business model calls for in-licensing molecules that
have passed the pre-clinical proof-of-concept stage from Israeli academic
institutions. The company then takes them through Phase IIa (the first
proof-of-concept in humans), at which time they are commercialized
in partnership with major pharma companies. From pre-clinical to Phase
IIa usually takes about five years and typically adds significant value
to the drug on trial.
Because BioLineRX is not limited to any one technology platform, as is common
with biotech start-ups, it can focus its resources on development of several
of the most promising drug candidates simultaneously. BioLineRX's multiple-drug
development strategy also addresses the shortage of world-class management. One
highly qualified management team can oversee a rich pipeline of projects, as
opposed to the classic one-team-for-one-platform model that is common among biotech
start-ups.
The OCS has acknowledged BioLineRX as equivalent to its original concept
of solely dedicated biotech incubators; in January 2004 it granted BioLineRX
$21 million in financial support. BioLineRX currently has in-licensed eight
molecules for treatments of the cardiovascular and central nervous systems,
in oncology, for inflammation, and for infectious
diseases.
Measuring Success
Most industry watchers agree that biotech will
be considered a leading Israeli industry only when international biotech
companies establish development centers on Israeli soil, much like other
high-tech sectors. While no major pharma has yet set up shop in Israel,
there has been a great deal of collaboration with young Israeli biotech
companies, as those funded by the BIRD Foundation involving Johnson and
Johnson, Bayer Pharmaceuticals, Bio-Rad, Pharmacia (now Pfizer), Harvard's
Medical School Hospital, and Enzo Pharmaceuticals.
Others argue that Israel is well on the way to becoming a major biotech
center. They cite a handful of companies such as Teva, Taro, Agis (Perrigo
Israel), Pharmos, D-Pharm, Frutarom, and Compugen as prime examples of
Israeli biotech successes.
How ever we choose to measure success, Israel certainly has the potential
to realize the goal of becoming a world leader in cutting-edge biotechnology
and bringing advanced biotherapeutic products to market. She may not
yet be there, but she is well on the way.
