Country Focus
Biotechnology in Israel
Israel is certainly not lacking in good ideas or excellent research in the area of biotechnology. Quite the contrary: In recent years, in large part thanks to the liberal legal framework, Israeli scientists have built up an international profile, particularly in the field of stem cell research. In contrast to the medtech area, the transferring of biotechnological research into commercial success has only succeeded in a couple of individual cases, and is largely down to just a few active pioneers. Nevertheless, in the last five years, the dynamic of the start-up scene has begun to expand, although there is still little venture capital flowing into the field. A key supporter of the local industrial sector is the Israeli pharmaceutical company Teva Pharmaceuticals, one of the world’s largest generics manufacturers.
Corporate landscape
According to the Israel Life Science Industry (ILSI), in 2006, the Israeli biotechnology industry comprised a total of 157 companies (excluding agrobiotechnology), of which 42 companies - nearly a third (27%) – were already making an independent profit. Most of these sell diagnostic tests or products for non-specific applications, i.e. hardware and reagents for research or other services. In general, the industry is still very young - more than half of the companies are less than five years old, and two-thirds of all biotech companies are very small firms with a maximum of one to ten employees. The first umbrella organisation for Israeli biotech, the Israel Life Science Industry (ILSI) was founded in 2005. Current turnover figures for the industry are not available. The most recent data is from 2001: At this time, sales of biotechnological products were close to 800 million U.S. dollars - primarily generated by exports of therapeutic, diagnostic and agricultural applications.
Employee structure of Israeli biotech companies (2005)
| Number of employees: | 1-10 | 11-20 | 21-30 | 31-50 | more than 50 |
| Number of agrobiotechnology companies | 11 | 4 | 1 | 3 | 2 |
| Number of biotechnology companies | 88 | 13 | 6 | 13 | 9 |
Source: ILSI Database, 2006
Strength: Medical applications
The focal point of Israeli biotechnology is unquestionably in red biotechnology applications, in particular diagnostic tests (18%), tissue transplant production (tissue engineering) and cell therapy development (16%), and bioinformatics and drug development (15%). The areas of neurological disorders, cancer and autoimmune illnesses are also the focus of intense research efforts. Only 7% of companies are active in industrial biotechnology. In 2006, 36% of the 157 companies were still in starting phases and were receiving seed financing, while 25 (16%) of companies had products or clinical studies in the pre-clinical phases, and another 21 (13%) companies were conducting studies in advanced clinical phases.
Sectors within the Israeli biotech industry
| Sector | Company |
| Diagnostic tests | 28 |
| Tissue engineering and cell therapy | 25 |
| Bioinformatics, drug discovery, proteomics | 24 |
| Antibodies, immunotherapies, vaccines | 19 |
Gene therapies, molecular biology | 19 |
| Ragents and hardware | 14 |
| Industrial applications | 11 |
| Biomaterials & plasma products | 9 |
| Pharmaceuticals, biopharmaceuticals, biogenerics | 8 |
| Agrobiotechnolgy | 22 |
| Total | 178 |
Source: ILSI Database, 2006.
According to research conducted by auditors Ernst & Young (Global Biotechnology Report 2007), the pipeline of private Israeli biotech companies in 2006 comprised a total of 67 drug candidates. Israel, in a European comparison, would thus find itself in a ‘middle field’, in sixth place behind Germany (151 candidates), Britain (106) and France (85), but ahead of Sweden or Spain. There were a total of 16 products in clinical phases among the listed biotech companies in 2006 (eighth place on a European scale), significantly fewer than the United Kingdom (246), Switzerland (97) and Germany (77).
Overview of the development pipeline of Israeli biotech companies
| Pre-clinical | Phase 1 | Phase 2 | Phase 3 | Total | |
| Listed biotech-companies | 5 | 3 | 6 | 2 | 16 |
| Private biotech companies | 33 | 14 | 18 | 2 | 67 |
Source: Ernst & Young (2007, Global Biotechnology Report)
No cultivation of GM-plants
Alongside, there are also activities in the field of agrobiotechnology, where the Association of ILSI has counted 22 companies in a separate list, although this is not thought to be complete.
A survey of Israeli biotechnology undertaken in 2003 found that nearly 20% of all companies undertake agrobiotechnological research and production, with an emphasis on veterinary biotechnology, fertilisation and pest control. At the current time, no genetically modified plants are grown for commercial purposes in Israel. However, Israel does import GM soya and maize, primarily raw materials for the production of feeds and foodstuff. The U.S. Foreign Agricultural Service (FAS) and official representative of the U.S. Department of Agriculture (USDA) in Tel Aviv have estimated that, in 2006, almost 60% - 70% of all soybean imports and 40% - 60% of imported maize in Israel originates from genetically modified crops.
Furthermore, Israeli companies are also active in the field of biofuel development using renewable resources. For example, the Israeli firm Algatech, in cooperation with U.S.-based GreenFuel, has pilot plants for the production of biofuels using algae, and is working on the optimisation of microalgae for the same goal. The company Algatech has used microalgae to create a carotenoid dye known as Astaxanthin that is specifically intended for application in the cosmetics and food industries.
The life science sector in Israel
| Sector | Number of companies | Percent |
| Medical technology | 396 | 53 |
| Biotechnology (not including agrobiotechnology) | 156 | 21 |
| Pharmaceuticals | 97 | 13 |
Medical information technology | 37 | 5 |
| Agrobiotechnology | 22 | 3 |
| Service provision | 15 | 2 |
| Other | 21 | 3 |
| Total | 745 |
Goal for 2010: 14,000 employees and 3 billion-euro turnover
Of all the Israeli life sciences sectors, biotechnology is the second largest. Most companies are active in the field of medical technology. The total number of employees in this area is estimated to be 25,000 (figures for 2005). There are no current data on the number of employees in the biotechnology sector. The latest published figures go back as far as 2000, during which time around 4000 people were working in the field of biotechnology in Israel. (Nature Biotechnology, 2001, Issue 19, P. 518).
According to the Monitor Report - a study on biotechnology in Israel published in 2001 - the biotechnology industry is predicted to grow to up to 14,000 employees, and see sales increase to 3 billion U.S. dollars. Since the 90s, the government has supported the commercialisation of biotech developments through a series of programmes that are overseen by the Office of the Chief Scientist (OCS) within the Ministry of Industry and Commerce. For example, companies can apply for loans for R&D costs that must only be repaid if the research actually results in the development of a commercially successful product. One of the central OCS programs is the Magnet funding concept, which since 1995 has supported consortia made up of at least two companies and one university in the development of commercially interesting technologies. In such cases, the program provides up to 65% of the research budget. A number of biotechnology consortia have also received support through this program, for example Da’at (bioinformatics and protein modelling) and PharmiLogi, which produces risk minimising detection procedures for the development of novel pharmaceuticals.
On top of this, there has been a major push to establish biotech-sector incubators in the vicinity of research institutions (see pdf download: Israel Bio-Plan 2000-2010). However, this has proven to be more of a challenge than originally anticipated. Only BiolineRx – a company with incubator function for Israeli research projects, founded by pharmaceutical heavyweight Teva and a number of VC funds – was eventually given (substantial) state support in 2002. In 2007, BiolineRx became a listed company with a 50 million-U.S. dollars IPO - the largest sum to date for a biomedical company in the Israeli Stock Exchange.
Weizmann Institute: The nucleus of Israeli biotechnology
Israeli life scientists have long found it difficult to approach their work in strictly commercial terms. Only the Weizmann Institute for Science has excelled in bringing forward researcher pioneers, for example, Haim Aviv. Since the 80s, Aviv has been godfather to a wide range of Israeli biotech companies: in 1980 he founded BioTechnology General (taken over by Ferring in 1995), Diatech Diagnostics (taken over by Healthcare Technologies in 1991), Assutech (1990, today: HerbiMed) and Peptor (1993), which merged with the German biotech company Develogen in 2004. In the meantime, his development program DiaPep277 has been brought back to Israel and to the biotech company Andromeda, which was spun off from the Weizmann Institute in 2007.
Michael Reher is also regarded as one of Israel’s greatest biotech success stories. His discoveries in the area of interferons led to the creation of InterPharm Laboratories in 1978, the first Israeli biotech company. Together with Serono (now Merck-Serono), the company went on to develop an immune drug (Rebif) for the treatment of multiple sclerosis, which quickly gained blockbuster status, and brought handsome license payments for the Weizmann Institute. Nevertheless, there have also been less fortunate times: in 2004, the Serono Rebif production plant in Israel was closed in favour of the central Serono production centre in Switzerland, resulting in job losses for more than 200 Israeli Interpharm Laboratories employees. This was a blow for the biotech industry, all the more so because the retaining of the local production facilities had actually been a precondition when Serono were given the rights to Rebif.
The story behind another major Israeli-produced drug - Copaxone - also begins at the Weizmann Institute: This ‘polypeptide’ is now used as an immunomodulatory medicine for the treatment of relapsing-remitting multiple sclerosis, and has also reached blockbuster status. The developmental work on the substance began in the 60s (led by Dvora Teitelbaum, Michael Sela and Ruth Arnon), and was later driven forward by the work of U.S. neurologist Murray B. Bornstein, who, with no industrial support, successfully began a Phase III study in the United States. Following the positive outcome, Israeli pharmaceutical company Teva climbed on board in 1987 with a view to bringing the substance onto the market.
Click here for more information on the history of the development of Copaxone.
Teva Pharmaceutical has the largest market capitalisation on the Tel Aviv Stock Exchange.Source: Teva Deutschland
Teva Pharmaceuticals is today the only pharmaceutical heavyweight in Israel, having made its fortune through the production of generics. The company, founded in 1901, has its headquarters in Tel Aviv and is one of the world's largest pharmaceutical companies. It is thought to be the largest generics manufacturers in the world, and is taking ever more interest in biotechnology. The company made headlines at the beginning of 2008 with a takeover of U.S. biotech company CoGenesys, a specialist in the early drug development of biopharmaceuticals, for 400 million U.S. dollars. The acquisition - seen as a long-term growth driver for Teva – is intended to strengthen the company’s position in the market for biosimilars.
Other than Teva, there are not many available cooperation partners in Israel, meaning that many Israeli biotech companies have to look abroad to establish partnerships. This is encouraged through the arrangement of joint research and development projects between Israeli and foreign companies, for example, with the help of the not-for-profit Israeli Industry Centre for Research and Development (MATIMOP), or bilateral research funding programs (In Germany: BIO-DISC). Most foreign cooperation partners traditionally come from the U.S. or Europe. For example, in 2007, Germany’s Bayer CropScience and the Israeli company Evogene Ltd. embarked on a collaborative project for the development of high-profit crops.
Venture capital situation on a positive path
For investors, the situation was not always rosy. Although about ten VC funds conducting life science activities exist in Israel, the focus is on medical technology, and most spend only a maximum of 20 percent of their budgets on biotechnology (Nature Biotechnology, September 5, 2005). In 2006, the auditors Ernst & Young reported in their Global Biotechnology Report 2007 that Israel had seen a major rise in venture capital spending, from 33 million euros in 2005 to 113 million euros in 2006. Most of the 26 deals, however, remained extremely small and involved on average a volume of 4 million euros. Only the Jerusalem-based company Chiasma succeeded in breaking through with a 35 million-euro C-round financing, taking it to ninth place in the list of the largest VC deals of 2006. According to a study by Lead Capital (Israel Tech and Venture Capital Review 2007: download pdf), in 2007 things looked somewhat less positive. Whereas 109 million euros flowed into medical technology, biotech companies were only able to attract 43 million euros. This represents just four percent of the total VC capital invested in Israel.