The PillCam SB Capsule Endoscope, used to diagnose gastrointestinal diseases,
was recently cleared for marketing in Japan. Developed by Israel's Given
Imaging, the truly novel device is fast on its way to becoming a diagnostic
standard around the world, and grew out of a medical device industry that
some consider to be the most sophisticated in the world.
In 2004, according to the Israel Life Science Industry, medical devices were
Israel's largest life sciences subsector, with its approximately 250 companies
representing 54% of the total. Exports from the medical devices reached $1.09
billion in 2004. According to Israel's Ministry of Industry, Trade & Labor,
the country leads the world in patents per capita for medical devices. Subsectors
of the industry consist of therapeutic devices; medical equipment; diagnostics,
monitoring, and imaging; and drug delivery. Major markets served are North America,
the EU, and Asia.
Support for medical device development comes from both government and private
investments. In 2003, 21% of the companies receiving grants from the Office of
the Chief Scientist were in the medical device field. Last year, medical device
companies raised more money from venture capitalists than any other health care
industry segment -- investments totaling nearly $180 million.
Answering a Major Need
What is it that makes Israel's medical device industry so successful? Unlike
some other markets, the medical device market seeks major changes or paradigm
shifts in an area (or issue) that requires a solution. And Israeli entrepreneurs
and manufacturers have found that their technologies meet the needs of the
market … in a major way.
According to David Grey, CEO of Truphatek & Veinomed, Israel's strength in
development comes from its "ability to mix and match various engineering
and medical science disciplines to produce 'uniquely clever ideas.'" Netanya-based
Truphatek manufactures a range of laryngoscopes and other airway management and
emergency medical devices.
Noam Hadas, CEO of SLP Ltd., concurs: "The Israeli advantage is 'thinking
out of the box.' We are less exposed to 'that's what everybody is doing' and
more likely to come up with new solutions and fresh ideas." SLP manufactures
advanced sensors used to diagnose sleep disorders. The company is based in Tel
Aviv.
Hadas emphasizes that because Israel is a "dynamic society," it can
transform "ideas into products very quickly" and "improvise" to
develop creative solutions.
Size and Location Do Matter
The country's size also gives it an advantage. On the one hand, a diverse population
in a relatively small space gives developers opportunities for testing in different
areas in a relatively short time without incurring significant travel costs.
The country's small population, on the other hand, means that the local market
is "tiny," to quote Truphatek's Grey. Therefore, home-grown companies
are "98% export-oriented." Local companies have to work with U.S.
(or other) manufacturers and distributors to form "symbiotic relationships" between
the Israeli company and leading global players.
While size has its benefits, both Hadas and Grey agree that even though Israel
understands the development process extremely well, the country fails at marketing
because it doesn't understand the market, or the needs of the market. "Being
far from the market," Hadas observes, "creates a huge gap in understanding
the true needs of the customers." So, the country develops "interesting" concepts
scientifically, but "they are unrelated to the needs of the physicians or
the medical industry outside Israel."
This "lack of understanding," in Hadas's view, "leads to big errors
in marketing and support of the product after it is launched." Grey thinks
we "fall down at marketing simply because it is very hard for us to understand
the American, European, or Japanese medical device consumer."
On the Horizon
As for the future, Hadas believes that "small
companies with good ideas and developments will be taken over by large multinationals
and lose their Israeli identity," a phenomenon that has occurred in
the country's telecom industry. Grey sees things similarly. The local market
will remain small, "but global device manufacturers will set up local
subsidiaries." These subsidiaries, in Grey's opinion, will run the development/technical
side in Israel and use our 'entrepreneurial talent' "to create products
for their own [the global manufacturers] needs."
