Investing in The Israeli Life Sciences Industry 2012

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Investing in the Israeli Life Sciences Industry 2012
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Investing in the Israeli life sciences industry 2012

Israels progressive, dynamic and knowledge-based life sciences industry is rapidly developing and fast becoming an attractive investment opportunity in early-mid stage ventures. The Israeli life sciences industry is an example of an innovative industry, where excellence in academic research, in collaboration with governmental support is translated into commercial success. The Israeli Life Science business sector encompasses companies that provide a wide array of products and technologies used for treatment and diagnosis of conditions and pathologies, including: innovative chemical and biological drugs, medical equipment, orthopedic appliances, electrometrical equipment, as well as diagnostic kits and equipment. This report covers the current state of the life sciences industry in Israel, including: business environment, academic R&D, government R&D incentives, current state of investment in the life sciences field, several company profiles and other tools which will aid in the assessment of opportunity areas and upcoming trends in Israel. The life science industry in Israel presents an attractive investment opportunity due to the unique combination of entrepreneurial human capital and dedicated government support in the country. As demonstrated by the successes of the Israeli high-tech industry, the combination of entrepreneurial creativity and technical know-how is a potent mix. Under the right circumstances, with a certain availability of venture capital, life sciences in Israel have the potential to expand in size and market value to match the previous successes of the world renowned Israeli high-tech industry.
Investing in the Israeli Life Sciences Industry
2012
Published by: Bioassociate Consulting & Management Ltd. January 2012
Bioassociate 1 Azrieli Tower 132 Menachem Begin St. Tel Aviv 67021 ISRAEL info@bioassociate.com www.bioassociate.com Tel: +972 3 541 5050 Fax: +972 3 7164965
About Bioassociate
Bioassociate is an Israeli based company established in 2008 and operating in the Israeli life sciences arena. Bioassociate provides expertise-based consulting and research services to private investors, investment banks, institutional investors and any other investment entities interested in the pharmaceutical, biotechnology and life science sectors. Bioassociate structures its teams with multidisciplinary members to conduct specific assignments. Each team is combined of a life science professional that brings an extensive knowledge and experience in the biotech field, and a financial professional with years of experience in the life science sector. This leads to reports that have a deep scientific understanding on one hand, and strong financial meaning on the other hand. The Bioassociate team has industry experience as well as consulting and research track record, ensuring that projects are delivered with both professionalism and real-world relevance.
Disclaimer
At the time of creation of this report, all information present herein was known to be true and accurate, to the best knowledge of the creators. Bioassociate accepts no liability whatsoever for any loss or damage resulting from errors, inaccuracies or omissions affecting any part of the publication. All information is provided without warranty, and Bioassociate makes no representation of warranty of any kind as to the accuracy or completeness of any information hereto contained.
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2012 Bioassociate Consulting & Management Ltd. All rights reserved. All information contained in this publication is copyrighted in the name of Bioassociate Consulting & Management Ltd., and as such no part of this publication may be reproduced, repackaged, redistributed, resold in whole or in any part, or used in any form or by any means graphic, electronic or mechanical, including photocopying, recording, taping, or by information storage or retrieval, or by any other means, without the express written consent of the publisher.
Table of Contents
1. 2. 3. Definitions ....................................................................................................................................... 7 Israel: Quick Facts ........................................................................................................................... 8 Business & Investing Environment.................................................................................................. 9 3.1 Banking System ..................................................................................................................... 9 3.2 Taxation ................................................................................................................................ 9 3.2.1 Corporate Tax ................................................................................................................. 9 3.2.2 Capital Gains Tax............................................................................................................ 9 3.2.3 Taxation of Royalties ...................................................................................................... 9 3.2.4 Taxation of Dividends ..................................................................................................... 9 3.2.5 Tax treaties................................................................................................................... 10 3.2.6 Tax-related benefits and incentives ............................................................................. 11 3.3 Stock Exchange.................................................................................................................... 12 3.4 Trade Agreements .............................................................................................................. 12 3.5 Intellectual Property ............................................................................................................ 12 4. 5. Israeli Life Sciences: Competitive Edge ......................................................................................... 13 Israeli Life Sciences Research and Development .......................................................................... 14 5.1 Academic R&D..................................................................................................................... 15 5.2 Academic R&D Funding ....................................................................................................... 16 5.3 Quality and Outputs of Basic Research ............................................................................... 17 5.3.1 Patents ......................................................................................................................... 17 5.3.2 Bibliometrics ................................................................................................................. 18 5.3.3 Academic Successes ..................................................................................................... 19 5.3.4 Stem Cell Developments ............................................................................................... 20 5.3.5 International University Links ...................................................................................... 21 5.3.6 Technology Transfer Offices ......................................................................................... 22 6. Government R&D Support Initiatives ........................................................................................... 27 6.1 Office of the chief scientist .................................................................................................. 27 6.2 Types of Grants ................................................................................................................... 28 6.3 Technological Incubators .................................................................................................... 29 6.4 International R&D Cooperation .......................................................................................... 32 7. Israeli Life Science Business Sector ............................................................................................... 35 7.1 Human Capital in the Life Sciences ..................................................................................... 35
Bioassociate Consulting & Management Ltd.
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Investing in the Israeli life sciences industry 2012 7.2 Clinical Trials Regulatory regime ...................................................................................... 37 7.3 Life Science Key Sectors ....................................................................................................... 38 7.3.1 Medical Devices............................................................................................................ 39 7.3.2 Healthcare IT ................................................................................................................ 42 7.3.3 Biotechnology and Bio-Pharma.................................................................................... 43 7.3.4 Pharmaceuticals ........................................................................................................... 46 7.3.5 Ag-Biotech .................................................................................................................... 48 7.4 Life Science Exports ............................................................................................................. 48 8. State of Investment in the Life Sciences ....................................................................................... 50 8.1 Venture Capital Raised ........................................................................................................ 50 8.2 Public Companies and IPOs ................................................................................................. 54 8.3 Mergers and Acquisitions .................................................................................................... 55 8.4 Increasing Multinational Interest ........................................................................................ 56 9. Conclusion ..................................................................................................................................... 58
10. Selected Company Profiles ........................................................................................................... 59 10.1 Private Companies ............................................................................................................ 59 VBL Therapeutics ........................................................................................................ 59 BrainsGate................................................................................................................... 60 Chiasma ....................................................................................................................... 61 10.2 Public Companies .............................................................................................................. 62 BioLineRx..................................................................................................................... 62 Aposense ..................................................................................................................... 64 Intec Pharma ............................................................................................................... 65 Protalix ........................................................................................................................ 66 Mazor Robotics ........................................................................................................... 68 References ............................................................................................................................................ 69
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1. Definitions
Life Sciences as utilized in this report, and as defined by the Statistics Bureau and the Ministry of Trade and Commerce of Israel, encompass the following divisions: Medical devices: Comprising of sub-sectors such as Telemedicine and Medical Robotics, the division of Medical Devices primarily deals with the integration of medicine and electronics, materials science and software. NMR imaging, medical cameras and robot-assisted surgery are examples of this division. Healthcare IT: A sub-division of medical devices which deals exclusively with electronic storage and processing of healthcare information and data, as well as general process optimization in hospitals and medical centers. Biotechnology: Biotechnology primarily deals with the genetic engineering and modification of microorganisms and plants for the creation of novel compounds which range from medicaments and nutraceuticals to bio-fuels. An example of this division is the targeted delivery of a drug in a protein nanoparticle. Agricultural biotechnology (Ag-Biotech): This sub-division of biotech deals with the genetic modification of plants and microorganisms for agricultural use. Genetically modified crops and biologically-derived pesticides are examples of Ag-biotech. Pharmaceuticals: Chemically derived medical compounds. Biopharmaceuticals: Biologically derived medical compounds, such as compounds which were produced biotechnologically by means of genetic modification, or which derive from attenuated forms of living organisms (namely vaccines).
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2. Israel: Quick Facts
Population: 7,785, 400 (September 2011) GDP per capita: 27,162 (March 2011) GDP Growth rate (2009): 3.3% (Q2 2011) Currency: New Israeli Shekel (1 USD=3.56 ILS; 2011 average) Main cities: Tel Aviv, Haifa, Jerusalem, Beer Sheva Main exports: Agricultural products, information & communication technologies, cut diamonds, chemicals Main trading partners: USA, Germany, UK, France, Belgium
6.4% of total population (18-64) are entrepreneurs

Israel has the highest R&D expenditure as % of GDP in the world Israel has the most biotech startups per head of population in the world Israel has one of the highest concentrations of scientists per capita (145 per 10,000) Israel is first in the world in medical device patents per capita
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3. Business & Investing Environment

3.1 Banking System
The banking sector is the major financial entity of Israel, offering a full range of services commonly found in the U.S. and the EU. The Bank of Israel is the countrys central bank, which regulates monetary policies and interest rates, provides economic advice to the government, supervises local banks, supplies currency and manages the states foreign currency. Recent changes in the central banks voting and decision making processes put the bank in line with the modern international banking system.
3.2 Taxation
3.2.1 Corporate Tax Corporate tax is applied on the worldwide income of Israeli companies or on income of non-resident companies which was accrued in Israel (unless a specific exemption or treaty exists). Corporate taxes in Israel have historically been high, although the government put forth dedicated efforts to ensure tax rates are en par with the U.S. and the EU. The 2012 the corporate tax target is 25%. 3.2.2 Capital Gains Tax Capital gains accrued by residents and non-residents which derive from the sale of assets in Israel, including shares in Israeli companies, are subject to capital gains tax unless an exemption is available or unless a tax treaty between Israel and the specific country exists. Residents of Israel are furthermore subject to capital gains tax on the disposal of assets overseas. The general tax rate on disposal of assets and real-estate is 25% (20% until 2011). The corporate capital gains tax is the companys current tax rate. A tax not exceeding 25% (20% until 2011) applies on the sale of shares for non-significant shareholders and up to 30% (25% until 2011) for significant shareholders (those shareholders which alone or jointly with another hold a 10% controlling interest in a company). Capital losses may be used to offset capital gains, provided both the gains and losses were accrued in Israel or both were accrued overseas. Capital gains tax is applied on the day of sale and tax reports (with exception of real estate) have to be filed within 30 days following sale date. 3.2.3 Taxation of dividends Dividends are taxed at 30% (25% - 2011) for significant shareholders and 25% (20% - 2011) for nonsignificant shareholders. 3.2.4 Taxation of royalties Royalties (i.e. such as derived from licenses, patents, etc) paid by Israeli companies to non-resident corporations are subject to a withholding tax rate of 24%, and 25% for non-resident individuals. Tax treaty exemptions apply.
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3.2.5 Tax Treaties In order to grant relief from double taxation the government of Israel established a solid network of tax treaties with 52 countries. In addition, tax treaties with Malta and Panama were signed in November 2011, which will take effect in the next 1-2 years. Tax treaty rates apply in all cases unless a domestic law takes precedence. Current agreements and rates are shown in table 1. Withholding tax rates for non-treaty countries are 20/25% on dividends, 25% on royalties and vary for interest rates. Table 1. Withholding tax rates on dividends, interest and royalties as part of tax treaties of which Israel is a signatory. Country Dividends (%) Interest (%) Royalties (%) Austria* 0/10 (20/25) 5 (15) 0 (10) Belarus 10 5/10 5/10 Belgium 0/5 5 0 Brazil 10/15 15 10/15 Bulgaria 7.5-12.5 5/10 7.5-12.5 Canada 15 15 15 Croatia 5/10/15 0/5/10 5 China 10 7/10 10 Czech Republic 5/15 10 5 Denmark* 0/10 0/5 0 Ethiopia 5/10/15 0/5/10 5 Estonia 0/5 0/5 0 Finland 5/10/15 10 10 France 5/10/15 5/10 10 Georgia* 0/5 0/5 0 Germany 25 15 0/5 Greece Unrestricted 10 10 Hungary 5/15 0 0 India 10 10 10 Ireland 10 5/10 10 Italy 10/15 10 10 Jamaica 15/22.5 15 10 Japan 5/15 10 10 Korea S. 5/10/15 7.5/10 2/5 Latvia 5/10/15 5/10 5 Lithuania 5/10/15 10 5/10 Luxemburg 5/10/15 5/10 5 0/15 0/5 0 Malta* Mexico 5/10 10 10 Moldova 5/10 5 5 Netherlands 5/10/15 10/15 5 Norway 5/15/25 25 10 Philippines 10/15 10 15 Poland 5/10 5 5/10 Portugal 5/10/15 10 10 Romania 15 5/10 10 Russia 10 10 10 Singapore 5/10 7 5
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Country Slovakia Slovenia South Africa Spain Sweden Switzerland Taiwan Thailand Turkey Ukraine United Kingdom* USA Uzbekistan Vietnam
Dividends (%) 5/10 5/10/15 25 10 0/5/15 5/10/15 10 10/15 10 5/10/15 0/5 (15) 12.5/15/25 10 10
Interest (%) 5/10 5 25 5/10 25 5/10 7/10 10/15 10 5/10 0/5 (15) 10/17.5 10 10
Royalties (%) 5 5 0 5/7 0 5 10 5/15 10 10 0 (15) 10/15 5/10 5/15
(*)
Treaty has been signed but has not yet ratified. In case of existing treaty, valid percentages are in parentheses.
3.2.6 Tax-Related Benefits and Incentives Under the law of Encouragement of Capital Investment the Tax Authority administers and Tax Benefits program offering substantial tax relief to foreign, high-tech and R&D, and high priority region investors. Export: The Israeli Tax authority recently introduced a revised tax relief law whereby any industrial enterprise can take advantage of significantly reduced corporate income tax rates if 25% of its total turnover is exported. However, certain biotechnology companies may benefit from these reductions without the export requirements. Tax benefits: o In rural development areas A (highest priority regions, consisting of remote settlements and scarcely populated areas, such as the Galilee and the Negev) a reduced corporate tax of 10% in 2011-2012, 7% in 2013-2014 and 6% in 2015, is imposed. o In the rest of the country a reduced corporate tax of 15% in 2011-2012, 12.5% in 2013-2014 and 12% in 2015, is imposed. o Investors are subject to a benefit dividends tax rate of 15%. Investment grants o An industrial enterprise may be entitled to a capital investment grant up to 34% in area A and 24% in area B. o In addition, R&D investments are eligible for diverse government grants in conjunction with tax benefits, as stipulated in the recent 2011 tax amendments. R&D grants are discussed in chapter 6.
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3.3 Stock Exchange

The Tel Aviv Stock exchange (TASE) is Israels only stock exchange and plays a major role in the countrys economic growth. Trading takes place in shares, bonds and derivatives. 622 companies are listed on the TASE, 60 of which are also listed on other exchange markets. TASE also lists some 180 exchange-traded funds (ETFs), 60 government bonds, 500 corporate bonds, and more than 1000 mutual funds. In addition, approximately 100 Israeli companies are listed on the NASDAQ. 57 life science companies are currently traded on the TASE, and a biomed index featuring many promising life science start-ups was launched in March 2010. The Israeli Securities Authority (ISA) supervises TASE and acts to enforce the Securities Law in order to ensure maximum transparency and fairness of activity for the investor. The regulatory framework of TASE has been recognized by the U.S. Securities and Exchange Commission, pronouncing TASE a designated offshore securities market. In addition, TASE is a member of the International Federation of Stock Exchanges (FIBV) and the International Options Market Association (IOMA). Companies trading on the TASE must provide financial statements in accordance with International Financial Reporting Standards.
3.4 Trade Agreements

Exports in Israel drive the economy, with circa 80% of the countrys industrial products currently being exported. There is an elaborate infrastructure of free trade agreements with Israels main trading partners. These trade agreements cover close to 80% of Israels foreign trade. The Israel-European Union Free Trade Agreement exempts most industrial and many agricultural Israeli products from import taxes in the EU. In return Israel has been diminishing import duties on EU products. To be eligible for import duty exemption products have to generally comply with certain rules of origini.e. for the most part they have to be manufactured in Israel. The Israel-US Free Trade Area Agreement states that no import duties, taxes or tariffs will apply on products traded between the two countries. Rules of origin exist in this agreement but differ from the agreement with the EU. The Israel-EFTA Free Trade Area Agreement allows free trade between Israel and the EFTA states, such as Norway, Switzerland and Liechtenstein. Rules of origin apply. The Israel-Canada Free Trade Agreement aims to gradually diminish import duties between the two countries, with rules similar to Israels agreement with the U.S. Free trade agreements also exist between Israel and the Mercosur nations, comprising of Brazil, Argentina, Uruguay and Paraguay.
3.5 Intellectual Property

Intellectual property (IP), comprising of patents, trademarks, copyrights and industrial designs, is recognized and protected under the 1967 Patent Act. Patents are granted for 20 years from date of application.
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4. Israeli Life Sciences: Competitive Edge

For a small country which boasts a biotechnologist for its first president, Israel has lived up to its high-tech reputation. With a highly skilled population, a number of world-class institutions and internationally renowned technology transfer centers, the state of the Israeli life science industry presents a vast investment opportunity.
Dynamic start-up arena

More than 1,100 life science companies currently operate in Israel, with 40 to 60 new companies established each year. 46% of all Israeli life science companies are less than 5 years old, with a further 34% of these young companies already generating revenue. On the Tel Aviv Stock Exchange, life sciences represent the largest sector, with 57 listed life science companies; several other companies are also listed on foreign stock exchanges.
Established success in innovation

On a global scale Israel is known as an exit culture for its track record of internationally acclaimed blockbusters and technologies, such as Enbrel, Exelon, DOXIL, Cationorm, PerioChip, Copaxone, Erbitux and Rebif, most of which have originated in university tech transfer sectors. Israel has become a sought-after hotspot for multinational R&D departments. Intel, Microsoft, Google, HP, IBM, Siemens, SAP, Cisco, Applied Materials, Motorola and Sun Microsystems are some of the hi-tech multinationals who have set up R&D departments and production facilities in Israel with much success. Acquisition of Israeli startups by multinational R&D departments is an emerging trend, as in the case of Cisco which has made nine acquisitions to date, and Broadcom which has invested over US$ 553 million in five acquisitions since 2000. The US pharma major Eli Lilly is currently heavily involved with Israeli pharma via its Lilly Ventures Fund, hoping to source novel molecules from Israeli startups. Similarly, the global giant Merck has opened a Merck Serono Israel Bioincubator Fund in 2011, in order to support and source Israeli life science startups.
Entrepreneurial spirit
Due to its bustling entrepreneurial vibe, Israel is commonly referred to as the Start-up nation, where entrepreneurship has become a national sport. The country is known to be start up-friendly with unique government rewards and incentives, which puts it in the top 20 of most entrepreneurial countries in the world. Israelis generally have a high awareness of entrepreneurship, and are perceived to be a culture with a go-get attitude where risk-taking and creativity are encouraged. According to the Global Entrepreneurship Monitor, Israel comes first in the world in its self-perception as entrepreneurial. The combination of skilled human capital and entrepreneurial atmosphere, combined with dedicated government cooperation make Israel a flourishing life science melting pot worth discovering.
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5. Israeli Life Sciences Research and Development

Science and technology is the most developed and thriving industry sector in Israel. Per capita, Israel is the worlds top spender on research and development, at 4.4% of GDP (Fig. 1), having recently overtaken the previous title holdersSweden and Switzerland. The government is responsible for 14% of R&D spend, while 79% comes from the private sector. Foreign sources and NGOs provide the rest of the funding.
Figure 1. R&D Expenditure as percentage of GDP amongst top spenders

5
4.5 Sweden 4 Israel France 3.5 Finland Germany 3 Japan USA 2.5 Denmark
2 2003 2004 2005 2006 2007 2008 2009 Source: OECD Library, 2011
Israel is currently fifth in the world for scientific publications per capita, a list which is topped by Switzerland and Sweden (Thomson-Reuters 2010). Its scientific activity, as represented by scientific publications, is 10 times higher than its percentage of the worlds population. Half of Israels population aged 25 to 34 possesses tertiary education, making it the sixth most educated country in the world after other hi-tech nations such as Japan and Singapore. There are seven research-intensive universities in Israel, dozens of government and public research institutions and a unique technology transfer system, which has to date proven to be remarkably efficient at commercializing academic developments. The government of Israel is strongly focused on creating an R&D support network in the country, through various grants and incentives programs.
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Investing in the Israeli life sciences industry 2012 5.1 Academic R&D Academia plays an indispensable role in innovation and the creation of human capital in Israel. There are seven world-class universities in Israel, the most R&D-intensive of which are the Hebrew University of Jerusalem, Tel Aviv University, Technion Institute of Technology and The Weizmann Institute of Science. The Hebrew University of Jerusalem is ranked 12th in the world by the quantity and quality of its biotechnology patents, ahead of such names as Oxford, Yale and MIT, with Tel Aviv University in 21st place (Milken Institute, 2006). Over 80% of scientific publications in Israel originate in universities. More than half of all academic research and development in Israel is currently focused on life sciences, and PhD graduates in the field of biological sciences by far outnumber any other discipline, with nearly 300 graduates per year. By comparison, physical sciences, the second highest annual number of PhD graduates, is only half that number (Fig. 2). Figure 2. Annual numbers of tertiary degrees (PhDs) obtained in Science and Technology in Israel
350 300 250 200 150 100 50 0
1996/7 1997/8 1998/9 1999/0 2000/1 2001/2 2002/3 2003/4 2004/5 2005/6 2006/7 2007/8 2008/9
BioSci
PhySci
Eng & Arch
Math & CompSci
Source: Central Bureau of Statistics Israel
There is a significantly higher number of biological sciences tertiary degrees as compared with other disciplines. The reason for this is likely to be the higher availability of funding for basic research in the life sciences, as Figure 3 demonstrates a clear trend that the more research-based and funding-dependant the degree levels become, the more dominant biological sciences become, in contrast with other degrees obtained. It is also clear that, beside the growing amount of academic life science R&D, the number of experts in this field is on the rise in Israel, contributing to the abundance of highly skilled human capital in the country.
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Investing in the Israeli life sciences industry 2012 Figure 3. First, Second and Third degrees in the sub-fields of Science and Technology, obtained in the 2008/09 academic year
Source: Central Bureau of Statistics Israel
5.2 Academic R&D Funding In terms of higher education expenditure on R&D (HERD) in Israel, the government is responsible for the highest percentage of funding, followed by the academia itself (Fig. 4). Although the percentage of government funding for HERD is not extraordinary in comparison with other countries, Israel has the highest proportion of foreign HERD funding (i.e. from donations originating abroad) amongst the countries compared.
Figure 4. HERD funding by financing sector, 1998-2007

100 90 80 70 60 50 40 30 20 10 0 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Source: Central Bureau of Statistics Israel Government Private nonprofit Business Foreign Academia
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Whilst government funding has declined in recent years, and self-funding by academia remains unchanged, business funding of HERD is steadily on the rise, as well as funding originating from non-profit entities. The increase in business funding is indicative of a novel trend whereby businesses and early stage investors seek to create stronger bonds with academia in order to source technology directly from basic research labs.
5.3 Quality and Outputs of Basic Research

It is characteristic of a young country in early stages of development to lack global prestige and reputation when it comes to academic faculties and quality of research. Nonetheless, in spite of its short existence, Israel already boasts a disproportionately significant number of Nobel Prize winning academics and several globally recognized research laboratories. 5.3.1 Patents The ratio of academic to business Patent Cooperation Treaty (PCT) filings are high in Israel, in comparison with other similar income countries (Fig. 5), denoting that universities are responsible for a significant share of tangible R&D output.
Figure 5. Top world PCT filings by ownership type

100 90 80 70 60 50 40 30 20 10 0 Others Government University Business
Source: WIPO, 2010
In terms of university patent applications, Weizmann Institute and Tel Aviv University are responsible for the highest share of United States Patent and Trademark Office (USPTO) patent grants (Fig. 6), due to the fact that these universities have the most flourishing technology transfer centers, and possibly due to Weizmann being a postgraduate-only university.
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Figure 6. USPTO Patent grants to Israeli Universities 2007-2010
Bar-Ilan Uni. 9 Carmel-Haifa Uni. 3 Ben Gurion Uni. 18
Weizmann Institute 110 Tel Aviv University 110 Hebrew University Jerusalem 61 Technion, 52 Source: U.S. Patent and Trademark Office
5.3.2 Bibliometrics At 761 publications per 100,000 of population, Israel is currently fifth in the world by the number of publications per capita it releases (Fig. 7). 80% of all publications are released by universities, and the topic of life sciences amounts to roughly half of all releases. Areas of clinical medicine, physics and biotechnology top the publication list (Thomson-Reuters, 2009).
Figure 7. Scientific publications per 100,000 population, 2004-2008

Switzerland Sweden Denmark Finland Israel Netherlands Norway Singapore Australia Canada New Zealand United Kingdom 0 200 400 600 800 1000 1200
Source: Thomson Reuters Scientific
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The Thomson-Reuters National Science Indicators report bibliometrically assesses the quality of publications by calculating the number of international citations per article. The report puts Israel in tenth place in terms of publication quality (Table 2), a high rank considering Israels age and size, indicative of the steadily rising prestige of the countrys academia. This is particularly significant for a country whose universities are considerably younger than their equivalents in countries with which Israel competes. Table 2. Ranking of countries according to quality of publications (number of citations per publication), 1981-2008 Rank Country Number of Number of Number of publications citations citations per publication 1 USA 6,682,395 150,777,498 21.97 2 Switzerland 329,150 7,052,983 21.43 3 Sweden 358,233 7,062,512 19.71 4 Denmark 182,669 3,569,996 19.54 5 Netherlands 455,267 8,665,689 19.03 6 United Kingdom 1,689,393 30,831,754 18.25 7 Canada 909,187 15,764,525 17.34 8 Finland 162,358 2,705,755 16.67 9 Belgium 236,997 3,755,945 15.85 10 Israel 230,868 3,638,183 15.76 11 Norway 212,539 1,860,900 15.31 12 Australia 515,850 7,806,489 15.13 13 France 1,134,511 16,799,702 14.81 14 Germany 1,575,725 23,339,250 14.81 15 Austria 160,877 2,243,672 13.95
Source: Thomson Reuters Scientific
5.3.3 Academic Successes In the past decade Israeli academic research labs have gained worldwide recognition on a number of occasions. The team of Prof. Beka Solomon, a neuroscience researcher at Tel Aviv University, topped global science headlines with an Alzheimers antibody breakthrough, which was subsequently cited as the most important breakthrough of 2007 by Scientific American. The compound was commercialized by Tel Aviv Universitys Ramot technology transfer center, and is currently in Phase III clinical trials conducted by Wyeth/Elan. Similarly, Technion shot to fame in 2004, when its Professors Aaron Ciechanover and Avram Hershko received the Nobel
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Prize in Chemistry for their discovery of Ubiquitin-mediated protein degradation. This breakthrough was of paramount importance to the field of biochemistry and lead to many further worldwide developments in the spheres of Cancer, Parkinsons Disease, Cystic Fibrosis and Alzheimers Disease. On Oct 5th 2011, the 2011 Nobel Prize in Chemistry was awarded to yet another Technion researcher, Prof. Daniel Shechtman of the department of materials science, for his discovery of quasicrystals, which revolutionized the way crystallographers and chemists around the world perceive the chemical composition of matter. Another Technion breakthrough was conducted by Dr. Shulamit Levenberg, the head of Biomedical Engineering department, who was voted the Science leader of the year in tissue engineering by Scientific American in 2006. The lab of Dr. Levenberg successfully created muscle tissue with an intricate blood vessel network which was able to attract additional blood vessels upon implantation. The impressive implication of this research is the no-longer-distant possibility of conducting artificially grown muscle replacement therapy, which was previously considered unfeasible due to the large supply of blood required by this type of tissue. Finally, the crystallographer Prof. Ada Yonath of Weizmann Institute received the 2009 Nobel Prize in chemistry for the elucidation of the structure and function of ribosomes arguably one of the most important biotechnology breakthroughs in the last century. 5.3.4 Stem Cell Developments Stem cell research excellence in Israel is well documented. In light of major stem cell developments, the government of Israel established a national bioethics committee, the goal of which will be to oversee the ethical aspects of all life science developments in the country. Furthermore, the Ministry of Health and the president of the Academy of Sciences and Humanities have created the Israel Stem Cell Research Forum (ISCRF) which will focus on the advancement of stem-cell based therapies. Israel is the current world leader in stem cell publications per capita, and Israeli scientists were the first to demonstrate in vitro differentiation of stem cells and also the first to genetically modify them. 11 out of 20 stem cell publications in the world are published by Israeli scientists, as are the top three most cited publications in this field.
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5.3.5 International University Links Israeli universities are gaining academic recognition through partnerships with other universities and through a rapidly growing number of exchange programs with some of the most prestigious universities in the world.
The Britain-Israel Research and Academic Exchange (BIRAX) program was launched in 2008 in order to build stronger academic links between the two countries. Joint research programs are organized and funded by BIRAX to encourage scientific cooperation through collaborated research projects. Teams from Manchester University and Weizmann Institute are currently working together on the creation of a yeast genetic interaction map, whilst Imperial College London and Tel Aviv University are collaborating on several projects in the spheres of biomedical engineering and neuroscience. More than ten other BIRAX projects are scheduled to begin shortly, after a recent injection of funds from the UK government. Similarly, Israeli universities are involved in a wide array of independent research and exchange partnerships with American Universities. MASA Israel, the Israeli gap year and exchange organization, has recently announced a large number of exchange programs with the worlds top UniversitiesThe Hebrew University now runs exchange programs with Harvard and Columbia Universities, whilst Haifa University is partnered with the University of Maryland and Florida University. Undoubtedly, more international partnerships will be established in the near future, as Israels academic popularity continues to grow. Beside academic research partnerships, the government of Israel has been heavily involved in a plethora of International R&D alliances, which will be covered later in this report.
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5.3.6 Technology Transfer Offices
Israel was one of the first countries in the world to realize and harness the commercial potential of basic research, and was a subsequent pioneer of technology transfer in the world, with some of its technology transfer offices (TTOs) nearly 50 years old today. Israeli TTOs are commercial entities which hold exclusive agreements with the universities they are linked with. Their role is to aid the commercialization of university technologies, mainly by generating patents. TTOs derive revenue from royalties on sales of out-licensed or spun-off products. There are currently a total of twelve TTOs in Israel: seven university-linked and five hospital-linked offices, with another university TTO on the way. 70% of all commercial developments at TTOs are in the field of life sciences. Two of Israels most prominent university TTOs, Yeda of Weizmann Institute and Yissum of the Hebrew University Jerusalem, are amongst worlds top revenue generating TTOs (Table 3), comparable in output to the most famous TTOs such as those of MIT and Stanford, despite having much lower research expenses than their counterparts. Moreover, Yeda is ranked third most profitable TTO in the world, with 660 live patent families and more than US$ 15 billion royaltygenerating sales in 2010, mostly from sales of blockbuster drugs such as Copaxone, Rebif and Avonex. Similarly, 40% of all biotechnology inventions in Israel originated at the Hebrew Universitys Yissum TTO, with 6,100 patents to date and reported royalty-derived revenues of US$ 60 million in 2010. Yissum and Ramot TTOs are amongst the worlds top PCT applicants.
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Table 3. Israeli University TTOs: number of patents, annual sales and major products University TTO (Founding year) Yissum (1964) Ramot (1973) Yeda (1959) T3, arm of Technion R&D Foundation(TRDF) (1952) Bar-Ilan Research & Development Company BGN Technologies Revenues Prominent Spin-offs/products Exelon, Doxil, BioCancell Therapeutics Ltd. Lipimix, Dentyl pH, Circadin
Hebrew University Jerusalem Tel Aviv University Weizmann Institute Technion Institute of Technology Bar-Ilan University
US$ 60 million (2010) US$ 6.7 million (2008) US$ 100 million (2007) US$ 200 million annual sales N/A
Bio-Hep B, Copaxone, Rebif Dunaliella, Erbitux
Azilect, Ladostigil (clin. Trials), Mazor Surgical Robotics Ltd. Medis El cancer cell blood sorting device, Birth control pill for men, BL-1020 Schizophrenia treatment Polyrizon Ltd. bio-gels, Nanoderma bio-formulation solutions Ltd. BioHug Technologies Ltd. (targeting autism & ADHD), BotanoCap Ltd. (agricultural delivery systems)
Ben-Gurion University of the Negev University of Haifa
US$ 15 million (2010) NIS 1.5 million (~US$ 400,000) (2010)
Carmel Haifa University Economic Corp (2002)
As of November 2010 Yissum TTO at the Hebrew University is responsible for the largest market share by existing technologies amongst the Israeli Tech Transfer companies (Fig. 8), due to its tremendous success with several blockbuster products and technologies, and a number of recent high-profile partnerships, such as the exclusive worldwide licensing agreement with Neurocrine Biosciences for the development and commercialization of Valnoctamide stereoisomers, implicated in the treatment of bipolar disorders and epilepsy.
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Figure 8. Market Share of Israeli TTOs based on existing technologies

Ben Gurion 4% Medical TTOs 8% Yissum 40%
Carmel Haifa 1% Bar Ilan 5%
Ramot 8%
Technion 13%
Yeda 21%
The invention of the cherry tomato took place at the Hebrew Universitys Faculty of Agriculture in 1973, when two professors Prof. Nachum Kedar and Prof. Haim Rabinowichwere attempting to create a hybrid tomato species with a delayed ripening time in Israels hot climate. Their invention was subsequently commercialized at Yissum and paved the way for the foundation of Israels two largest genetically engineered seeds companies Hazera and Zeraim Gedera, which were acquired by the multinationals Vilmorin and Syngenta. The two companies continue to be responsible for Israels commendable reputation and large share on the worldwide seeds market. Hebrew Universitys pharmacology department is arguably the most successful of all universitys departments, with several blockbusters to date, the most prominent of which is the Alzheimers drug Exelon and currently Israels only cancer medication Doxil. Exelon (Rivastigmine) is a cholinesterase inhibitor, developed by Prof. Marta Weinstock-Rosin in 1997 and subsequently sold to Novartis for commercial development. Administered orally or via a transdermal patch, Exelon treats symptoms of Alzheimers Disease as well as mild to moderate dementia associated with Parkinsons disease. In 2009 the sales of Exelon were nearly US$ 1 billion worldwide.
Doxil (Liposomal PEGylated Doxorubicin) is currently the sole global cancer medication of Israeli origin, developed by Prof. Yechezkel Barenholz of Hebrew University and Prof. Alberto Gabizon of Shaare Zedek Medical Center in Jerusalem. Commercialized by Yissum, Doxil is
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currently sold by Johnson & Johnson in liposomal form for the treatment of ovarian and breast cancers, with many further applications currently in development. Doxil 2009 sales were ~US$ 500 million.
Ramot, the TTO of Tel Aviv University, has had several successes to
date. Dentyl pH (Dentyl Active), the two-color-phase antibacterial mouth wash, which is currently the most popular mouth wash in the United Kingdom, was developed by Prof. Mel Rosenberg at Tel Aviv University in 1989 and commercialized by Ramot. Currently manufactured and sold by Boots UK, the sales turnover of Dentyl exceeded 8 million in 2006. Tel Aviv Universitys Prof. Beka Solomon developed a novel Alzheimers Disease treatment which is currently undergoing phase III clinical trials conducted by Wyeth/Elan, with promising preliminary results. What makes the treatment particularly attractive is its nasal mode of administration, since the drug is unable to effectively penetrate the blood-brain barrier. The Association of University Technology Managers (AUTM) ranks this development to be in the top 100 Technologies which promote world health. Prof Solomon intends to expand the unique phage-based nasal administration technique to many more drugs previously undeliverable to the brain. Many more drugs originating from Ramot are currently being developed, a full list and pipeline of which can be found at www.ramot.org/pipeline.html. In addition to its diverse pipeline, Ramot established a joint research fund with J&J at Tel Aviv University in 2007. The initial objective of the partnership is research in the spheres of diabetes, cancer, stem cell research and diseases of the central nervous system.
Yeda Research and Development Company, the TTO of the Weizmann Institute, is arguably the
largest and most established TTO in Israel. It boasts a significant number of blockbuster drugs, such as the hepatitis drug Bio-Hep B, the Multiple Sclerosis (MS) drugs Copaxone and Rebif, and a delivery technology for the cancer blockbuster Erbitux. Rebif is an interferon family drug used to effectively treat MS, and is used by approximately 70% of the ~2 million MS patients worldwide. It is marketed by Merck-Serono and is one of the companys main products, with sales of 1.54 billion in 2009. Currently sold by Teva and marketed in 49 countries worldwide, Copaxone was discovered by Dr. Dvora Teitelbaum at Weizmann Institute and generated sales of US$ 3.32 billion in 2010. It is an immunomodulator currently marketed for treatment of a variety of Multiple Sclerosis types. Yeda generates about 80 patents a year, 75% of them in life sciences, and sales of products generated at this TTO well exceed US$ 10 billion annually.
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T3The Technion Institutes TTO, has had several successes to date and has established itself as a
pioneer in Stem Cell Research and Medical Device developments in Israel. Azilect (Rasagiline), Technions drug, was developed by Prof. Moussa Youdim at Technion Faculty of Medicine in conjunction with Teva Pharmaceuticals. Azilect is an irreversible monoamine oxidase inhibitor used to treat symptoms of Parkinsons disease. Azilect was approved for sale in 2006 and its accumulated sales have already exceeded US$ 1 billion worldwide to date. T3s other claims to fame include the surgical robotics spin-off Mazor Robotics Ltd. and a promising Alzheimers and Parkinsons drug Ladostigil, currently in clinical development. Dozens of other technologies, ranging from cell sorting devices to muscle tissue engineering, are currently in commercial development at the TTO.
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6. Government R&D Support Initiatives

Israel is known to have a strong network of government R&D support. The first initiatives were put in place in the early 1990s when the country received overwhelming numbers of highly skilled scientists and engineers from the collapsed Soviet Union.
6.1 Office of the chief scientist

The Office of the Chief Scientist (OCS), at the Ministry of Industry, Trade and Labor, is responsible for the funding and incentivization of industrial R&D programs in Israel, and its activity is regulated under the Encouragement of Industrial Research and Development Law, passed in 1984. OCS typically provides R&D cash grants of up to 50% of approved expenses for projects and is eligible to provide participation grants of up to 70% for startups located in National Priority Regions. R&D budgets of the Chief Scientist are in the range of NIS1.7 billion (US$ 400 million) for up to 500 startups and 1000 projects annually, the majority of which originates from two sources: government transfers and royalties derived from previously supported projects, which currently amount to 3040% annually. Beside grants, the government provides generous tax breaks to entrepreneurs and investors, which will be discussed later in this report. Roughly 30% of OCS grants were dedicated to the life sciences in 2009, a percentage which has doubled since 2000. 480 Life Science grants were assigned by the OCS in 2009, the majority of which were in the Medical Device and Biotechnology sub-sectors (Fig. 9). Figure 9. OCS grants in Life Sciences, 2000 to 2009 (NIS million)
600 Medicines 500 Medical Equipment Biotech 400 78 300 78 200 110 112 155 161 100 55 247 64
100 121 0 2005 Source: OCS-MOITAL, 2010 2006 2007 2008 137 137 141
169
2009
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OCS Life Science grants have been on a visible increase in the last decade. Biotechnology is a defined preferred grant sector by the OCS and biotech projects benefit from more flexible conditions. As opposed to regular sectors, which only obtain one-year funding, biotech projects are funded for up to two years and biotech companies can apply to receive further fund injections at any time rather than once a year. The biotech sector also benefits from a higher OCS budget, and specialized Biotechnology Incubators with an intricate support network are being built throughout the country.
6.2 Types of Grants

General Industrial R&D Grants The OCS research committee estimates or approves the anticipated expenses of a project and decides on the proportion of funding the OCS provides, which shall not exceed 50% of the projected cost. The project must involve the creation of a new product or a significant improvement of an existing product. If the product becomes commercially viable, the company is obligated to pay royalties which normally range from 3% to 5% of annual revenues derived from sales of the product the OCS helped to develop, until the grant has been repaid in full. MAGNET Pre-competitive, generic R&D projects are funded by the OCS on the condition that the projects are conducted by a consortium of academia and industry, essentially encompassing a multitude of industrial and academic entities. The purpose of this OCS program is to encourage cooperation of industry and academia and to develop key technological infrastructures. Grants of up to 66% of the projected cost for industrial entities and up to 80% for academic institutions are available royalty-free. The duration of a Magnet consortium grant is 3-5 years. MAGNETON (Mini-MAGNET) The Mini-Magnet program is in essence identical to the Magnet program, with the exception of the required cooperation being between a single academic and a single industrial entity. The budget available for individual Mini-Magnet grants is up to NIS3.4 million (US$ 900,000). NOFAR The purpose of the Nofar program is to encourage the progression of applied academic research to industry in the biotech sector. The minimal requirement is that an independent investment of at least 10% of the projected cost will be made, with the OCS providing the other 90%, up to NIS 420,000 per grant (~US$ 112,000).
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KAMIN (2011) This novel aid program established in 2011 is another OCS incentive to strengthen the ties between business and academia. Kamin grants will target applied research developments at the valley of death stage, where academic developments in pre-industry stages appear lucrative but fail to appeal to the industry or academia for additional funding. No industry or incubator cooperation is necessary at this stage, and grants of up to NIS 400,000 (~US$ 110,000) are available for a period of up to 3 years. TNUFA TNUFAThe Israel Idea Promotion Center, is a non-profit OCS organization with programs focused on successfully linking individual inventors and investors. It mainly sponsors garage enterprises in pre-seed stage, with grants of up to NIS 210,000 (~US$ 45,000) for preliminary R&D programs, which constitutes the protection of intellectual property, prototyping and feasibility studies. In addition to funding, TNUFA provides a variety of expertise ranging from consultancy services and training seminars, to assistance in locating partners and investors. Most of TNUFAs budget originates from royalties from previously funded successful projects. HEZNEKThe Government Seed Fund Heznek is an OCS venture capital entity established in 2002 to encourage investments in Israeli startups, with a particular focus on communications, software and life sciences. Heznek operates on a fund-matching principle, where it will match up to 50% of the capital required if the rest of the funding is provided in parallel by an investor or an investment entity with sufficient funds and expertise. Foreign investment is currently highly sought after and encouraged by the government. The maximum funds available per investment by Heznek are NIS 5 million (~US$ 1.3 million). Heznek invests in startups which are less than 6 months old and have incurred less than NIS 1 million in expenses since their establishment. Under Heznek, the governments investment is in exchange for shares in the company. The matching investor has the option to buy the governments shares during the first 5 years at the initial price plus linkage and interest.
6.3 Technological Incubators

Governmental Incubators One of the OCS initiatives has been to set up talent-nourishing incubators throughout Israel, the purpose of which was mainly to nurture the ideas of highly skilled newcomers. There are currently 27 such incubators spanning the country, housing over 200 projects, ranging from medical devices to communications (Fig. 10). The average residency time at technological incubators is two to three years. The objectives of technological incubators are to provide a supportive network to individual novice entrepreneurs, in the form of financial support, consultancy services, administrative assistance and office/laboratory space. Incubators take up projects at fairly early stages of development and normally sponsor them for up to two years with a total of US $350,000 to US $600,000 (in National Priority Regions) per project, at a maximum of 85% of approved expenses. Biotech projects at technological incubators, as well as at specialized biotech incubators, benefit
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from grants up to US$ 1,800,000 for a maximum of three years. Statistically, 50% of incubator projects succeed in attracting secondary sources of investment after leaving the incubator. In the case of the creation of a viable product, incubator graduates are required to pay 3-3.5% royalties until the initial OCS grant has been repaid in full. Figure 10. Breakdown of incubator activity by R&D sector (2010)
Other 13% Agriculture and Environment 11% Biotechnology 19%
Electronics/ Communication 19%
Software 15%
Medical Devices 23%
Source: Office of the Chief Scientist, Ministry of Industry Trade and Labor
Incubator Privatization Pilot Scheme To date, 23 incubators around Israel have been privatized as part of a new Incubator pilot program, transforming from non-profit entities to for profit companies. The aim of privatization is to provide more legal flexibility for the inventor, to increase the general commerciality of incubators and to encourage the building of stronger industrial links. The level of government support in projects remains the same post-privatization, but the administrative expenses and legal issues become the responsibility of the franchisee. In National Priority Regions, the government may sponsor up to 49% of administrative fees in government convertible bonds. It is the franchisees responsibility to accept projects and determine ownership stakes, with government grants covering up to 85% of projected expenses, not exceeding US$ 400,000 (US$ 500,000 in National Priority Regions) for the duration of two years. In a similar way, the government will provide funds and administrative help for projects running at incubators which had been initially private. There are currently around 180 startups participating in the private incubator pilot scheme.
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Biotechnological Incubators In the past, technological incubators were undifferentiated, housing projects from all sectors under similar OCS funding conditions. In a recent development the government perceived the need to differentiate biotechnology projects from the rest, based on the fact that R&D in this sector has unique demands. Bio-incubators are a recent development which will see two specialized world-class incubators built in Israel. One bio-incubator is already in operation in Jerusalem, franchised by the Israeli giant BioLine Rx, and another is undergoing development. En par with the privatization scheme, bio-incubators will be managed by franchisees but will see government participation in the form of convertible bonds. Each project at a bio-incubator will be funded for a maximum of three years, and will be sponsored by the government up to 85% of approved expenses in the first year, up to 80% in the second year, and up to 75% in the third year, not exceeding NIS 8,100,000 (~US$ 2,150,000) over the three years. Other terms are similar to those instated at privatized technological incubators. The breakdown of OCS expenditure on the various schemes over the last decade is shown in figure 11. Figure 11. Total OCS budget for all support programs, 2005-2010 (NIS millions)
1800 1600 1400 1200 1000 800 600 400 200 0 2005 Source: OCS-MOITAL, 2011 2006 2007 2008 2009 2010 790 875 889 1009 141 183 1246 933 Others Technological Incubators MAGNET Industrial R&D 147 205 135 190 175 190 183 186 227 150
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6.4 International R&D Cooperation

Israel has entered a number of R&D partnerships with several countries, the aim of which is to promote research cooperation and to increase the availability of funding for domestic R&D. International R&D cooperation has been aggressively pursued and encouraged by the government in order to sync the Israeli hi-tech industry with global markets, to share and lower the risks, and to aid the establishment of Israels reputation as a global R&D player. MATIMOPThe Israeli Industry Center for R&D MATIMOP was established as an OCS agency, the role of which is to oversee and orchestrate all industrial international cooperation in Israel. Bi-National Funds and agreements and International R&D partnerships are organized and managed by MATIMOP. A number of Bi-National funds, which span North America, Europe and Asia, have been created in the last decade, and dozens more are currently being blueprinted by the agency. In addition, an impressive number of global partnerships and agreements have been signed under the encouragement of MATIMOP on behalf of the OCS. MATIMOP maintains a network of over 3000 Israeli companies interested in initiating international partnerships. A complete list of MATIMOPs initiatives can be found at www.matimop.org.il. Bi-National Funds BIRD-FThe Israel-U.S. Bi-National Industrial Research and Development Foundation BIRD-F was established in 1977 to promote cooperation between the private non-defence sectors of Israel and the United States. BIRD-F typically sponsors joint projects between startups and established companies alike, providing funds of up to 50% of approved costs per R&D project. Similarly to government grants, BIRD-F grants will be subject to royalty repayments of up to 150% of the initial sum, in the case that the grant yields a viable product. CIIRDFThe Canada-Israel Industry and Research Development Foundation CIIRDF was established in 1994 and modeled on BIRD-F to promote research links between Israel and Canada. Its conditions are similar to those of BIRD-F: CIIRDF will provide grants of up to 50% for joint Israeli-Canadian projects. SII-RDThe Singapore-Israel Industrial R&D Fund SII-RD was established in 1997 and was modeled on its bi-national predecessors. Initially both countries made annual deposits of US$ 2 million in order to increase the availability of funds. Currently SII-RD will fund up to 50% for bi-national products, up to a total of US$ 1 million per project, with demands that 100% of the grant be re-paid within six years following initial commercial transaction.
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BRITECHThe Britain-Israel Industrial R&D Fund BRITECH was founded in 1999 and has provided grants of over 12 million for over 100 projects since its establishment. BRITECHs funding terms are identical to those of BIRD-F, with a 150% royalty repayment condition. Five projects have been completed and commercialized to date, with a full royalty repayment of the earliest project already complete. KORILRDFThe Israel-Korea Industrial R&D Foundation This funding partnership was established in 2001 with an initial joint capital of US$ 6 million. The fund provides funds of up to 50% and up to a maximum of US$ 500,000 for bi-national projects. To date, KORIL provided nearly US$ 30 million to fund 98 projects. Recently an Australia-Israel cooperation fund was established, termed the Victoria-Israel R&D Cooperation Program (VISTECH), and several more bi-national funds are on the way. Bi-National R&D Agreements Bi-National agreements are joint industrial projects which are individually funded by their respective country, rather than by a mutual fund. To date, Israeli companies have entered over 30 bi-national agreements. Some of the participants include United Kingdom, Austria, Belgium, Canada, Sweden, Finland, Spain, Germany, Hong Kong, India and China.
Other International Initiatives EUREKA EUREKA is a prestigious pan-European network of 39 countries and the EU, which welcomed Israels participation in 1993, making it the only non-European member of the organization. As the largest pan-European R&D alliance, EUREKA aims to challenge the current trend of R&D migration to Asia and North America by encouraging inter-European public and private R&D cooperation. EUREKA boasts the creation of many prominent technologies, and provides funds of over 1.5 billion for 300 projects each year. In return, the total annual increase in sales among companies participating in EUREKA projects is approximately 2.8 billion, in addition to 25,000 jobs created annually. Israel has been an active EUREKA member since 2000 and chaired the organization during the 2010/2011 period. The chairmanship was lead by the OCS in conjunction with MATIMOP, during which time the OCS commissioned an Israeli report elucidating the commercial benefits of EUREKA participation. The report presented compelling evidence that EUREKA participants significantly out-perform their nonparticipant equivalents (in terms of size, location and revenue) worldwide.
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Seventh Framework Program of the European Unions Commission on Science and Technology The Seventh R&D Framework Program (FP7) is the European Unions main vehicle for EU R&D funding. FP7 plans to provide 54 billion over seven years (20072013) for joint R&D developments in academia and industry. FP7 has a strong focus on the life sciences, with particular emphasis on genomics, biotechnology for health, nanotechnologies and nanosciences, amongst others. Israel is currently the only full-time non-European FP7 member, and its activities in the framework are coordinated by the OCS-appointed Israel-Europe R&D Directorate for the Framework Program (ISERD). ISERD represents Israel at the Framework Program's management committee and aids academic and industrial entities through the FP7 application process. To date, more than 2000 Israeli entities participated in Framework Programs. Global Enterprise R&D Cooperation Network (GIRDF) and Multinational Project Centers In an attempt to increase international presence in Israel, MULTIMOP has created several incentives to attract large multinationals. GIRDF aims to encourage large multinationals to forge alliances with Israeli startups, by offering strategic cooperation agreements between the state of Israel and the implicated multinational. For this purpose, on MULTIMOPs agenda are multinational project centers, which would function as the international companys representative in Israel. Project centers are Israeli companies wholly owned by the multinational, and the role of which is to act on its owners behalf in finding Israeli partners. Project centers are subject to government funding, which is either 40% of the project centers operating expenses or 50% of accumulated funding given to the Israeli partner.
U.S.-Israel Science and Technology Commission (USISTC) The USISTC was initiated by the late Prime Minister of Israel Itzhak Rabin and U.S. President Bill Clinton in 1994, to provide the two countries with the opportunity to commercially and academically synchronize their latest R&D developments. Apart from providing grants and support for a variety of joint projects, USISTC acts on a legal front to minimize trade and other legal barriers between the two countries, such as facilitating FDA regulations for Israeli technologies. BSFIsraelU.S. Bi-national Science Foundation BSF is a research-based non-profit foundation promoting better links between the two countries basic and applied research institutions. Since its foundation in 1972 over US$ 480 million has been awarded to over 4000 joint research projects. BSF has also been a major source of seed money for individual scientists in Israel.
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7. Israeli Life Science Business Sector

With the wealth of human capital and the intricate life science-tailored support in Israel, it is unsurprising that the life science sector is Israels most active brokerage. The life science industry has demonstrated an average annual growth of 17% in the last decade, higher than other industries in the country, with over US$ 6 billion generated from sales of Israeli life science products last year. BMI predicts that Israels life science exports will double in the next five years, powered by Israels R&D capabilities. Because the costs of developing novel medical compounds are at a record high, on average reaching costs of dozens to hundreds of millions of dollars, it is necessary for small companies with patented technologies to establish partnerships with larger firms, which is the dominant trend in Israelparticularly amongst small pharma and bio-pharma entities. More than 1,100 life science companies currently operate in Israel, in contrast with just 168 in 1996, and 40 to 60 new companies are created each year. 46% of all Israeli life science companies are less than 5 years old, with a further 34% of these young companies generating revenue. Despite climbing development costs, Israel is ranked second amongst European countries with the highest number of biotech products in the pipeline (E & Y Beyond borders, 2010). There are currently 2,900 registered clinical studies ongoing in Israel, which represents 3% of the worlds clinical trials roughly 30 times higher than Israels percentage of the world population.
7.1 Human Capital in the Life Sciences

Although Israels R&D arena is not the worlds cheapest, it possesses certain attractive characteristics continuously singled out by investors, the most commonly cited of which are the entrepreneurial audacity and shared experience of the countrys intellectual capital. Today Israel has the highest number of scientists per capita in the world, and in 2007 it boasted 27 R&D workers per every thousand employees in the business sector (Fig. 12). 39% of the highly-skilled work force is currently employed in the life sciences sector. Furthermore, roughly 40% of the high-tech industry workers are women, which is higher than the OECD average. Women constituted 32.9% of all high-tech directors in 2010.
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Figure 12. R&D Personnel per Thousand Employed in the Business Sector, 2007
Israel Sweden Finland Denmark Japan France Austria Belgium Canada Germany Korea Singapore EU27 United Kingdom Ireland Spain 4 0 5 10 15 20 25 30 26.7 18.6 18.3 15.9 13.9 11.8 11.6 11.2 11 10.9 9.2 8.3 7.3 6.9 6.7 5.3
Source: National Bureau of Statistcs Israel; OECD
According to the Israeli work placement company Ethosia, 17% more jobs were created in the life science industry in 2010 than in previous years. Biomedical engineers, quality assurance specialists and life science project managerspreviously a low-demand rolewere the most sought-after workers, suggesting an increasing number of R&D projects in the life science business sector. In the life sciences sector, the majority of the work force is employed at SMEs and startups (Fig. 13). Figure 13. Number of Israeli life science companies and their respective size, 2010.
400 350 300 250 200 150 100 50 0 1-10 Employees 11-20 Employees 21-30 Employees 31-50 Employees >50 Employees Source: Israel Life Sciences Industry (ILSI) Database, 2010.
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7.2 Clinical Trials Regulatory regime

The Ministry of Health (MoH) acts as the U.S. Food and Drug Administration (FDA) equivalent in Israel. Over 3,000 clinical trial applications are processed by the Israeli Ministry of Health every year. As a result of the high concentration of globally certified medical experts, and the renowned quality of the Israeli medical industry, Israeli hospitals have become a clinical trial hotspot for foreign academia and multinationals. Currently roughly a third of all clinical trials in Israel are commissioned by foreign entities. Israeli hospitals have gained popularity in trials due to high patient availability and enrollment rates, low drop-out rates, adherence to global quality standards, and efficient data processing, chiefly due to the fact that nearly 100% of Israels healthcare professionals use computerized patient records. In 2007, the gross domestic income from clinical trials in Israel was estimated to be NIS 714 million (~US$ 200 million). Prior to assessment by the MoH, each clinical trial application is processed by the Institutional Ethics Committee of the participating hospital. Certain phase III trials of compounds with which the MoH was previously acquainted (termed Special Trials) may only require the assessment of the participating hospital. The average clinical trial approval time by all participating entities in Israel is 12 to 18 weeks, and 9-10 weeks for Special Trials. On average, the costs of clinical trials in Israel are slightly lower than in the U.S. International regulatory harmonization In 1997 the U.S. FDA approved Israel as a recognized clinical trial site. The implications of this approval were that trials conducted by U.S. companies and indeed by other multinationals could be moved to Israel in a significantly facilitated manner. As part of the 1997 harmonization agreement, FDA undertook the training of over 400 physicians in Israel and conducted Good Manufacturing Practice (GMP) and Good Clinical Practice (GCP) seminars throughout the country. As a result, Israeli clinical trial procedures are now en par with the International Conference on Harmonization (ICH) guidelines, and it acts as an approved clinical trial site for the European Union, Japan, the U.S., and other ICH members. For Israel, the harmonization agreements mean that Israeli life science products benefit from facilitated regulatory approval throughout many of the countries with which it trades, and a subsequently facilitated entry to foreign markets. Adherence to global standards, in particularly those which apply to medical devices, is maintained by the Standard Institute of Israel (SII), ensuring that the standards are in line with the international guidelines. Around 2,800 clinical trials were registered in Israel in 2010, which accounted for 72% of all clinical trials conducted in the Middle East that year. By Q2 of 2011, the number of registered trials rose to 2,932, demonstrating the continued interest in and success of the life science sector in Israel.
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7.3 Life Science Key Sectors

Israel has the third highest concentration of startups in the world, superseded only by Silicon Valley and the Boston metropolitan area. The majority of Israeli startups are in the life sciences sector. Of the 1026 life science companies currently operating in Israel, the majority specialize in medical devices and biotechnology (Fig. 14) Figure 14. Israels Life Science Sectors, 2010.
Ag-Biotech 3% Healthcare IT 7% Other 3%
Pharmaceuticals 11% Medical Devices 57% Biotechnology 19%
Source: Israel Venture Capital (IVC) Database, 2010
In terms of pipeline stages, most life science products are in clinical stages of development, with medical devices being the most dominant sub-sector in development (Fig. 15). According to the PwC report titled Race for Global Leadership: Medical Technology Innovation Scorecard, several factors are responsible for Israels thriving medical devices industry. Executives which took part in the reports questionnaire ranked Israel first in the world according to the ease of regulatory approval in the field. Financial incentives, government support, and innovation resources were also responsible for Israels high rank as the third most innovative country in the world in medical technology.
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Figure 15. Companies in Clinical and Pre-Clinical Stages of Various Sub-sectors, 2010.
100 90 80 70 60 50 40 30 20 10 0 Pre-Clinical Clinical Pre-Clinical Clinical Pre-Clinical Clinical
Medical Devices
Source: ILSI Database, 2010
Biotechnology
Pharmaceuticals
7.3.1
Medical Devices
Israel has established itself as a global pioneer in the medical device sector, with the highest number of medical device patents per capita in the world. Over NIS 3.66 billion (US$ 980 million) was generated by this sector alone in 2010. BMI predicts a steady growth in the medical device industry for the next decade, potentially reaching NIS 8 billion annually in 2020. Israels global medical device market share is particularly likely to increase after the U.S.Israels main competitor in this sector was hit with a 2.3% excise tax as part of the Affordable Care Act in September 2011. Currently 448 medical device companies are registered in Israel, over half of these were founded in the last five years, and roughly 80% in the last decade. The fields of medical equipment and disposables are this sectors most numerous technologies, amongst others such as imaging, drug delivery and diagnostics (Fig. 16).
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Figure 16. Medical Device CompaniesSubsectors, 2010.

Other, 3% Monitoring, 7%
Drug Delivery, 5%
Imaging, 10%
Disposables & Implantables, 43%
Diagnostics, 14%
Medical Equipment, 18%
Perhaps the most well-known Israeli medical device development is the Pillcamthe pill cameracreated by the Israeli Given Imaging in 1998. The size of a large tablet, the Pillcam aids the visualization of the esophagus and the gastrointestinal tract with no preparation or sedation necessary. Given sold 165,000 capsules in 2006 alone and reported a 4% sales increase in the U.S. and a 14% increase in the EMEA region in 2010. Two new video capsules have been launched recently. Another world-renowned Israeli medical device pioneer is InSightec. Founded in 1999, the company specializes in magneticresonance-guided Focused Ultrasound technology. The companys major technology, ExAblate 2000, is currently approved for use in directed, non-invasive treatment of uterine fibroid tumors, and is in clinical trials for the treatment of numerous other types of tumors. Since FDA approval in 2005 the company has received a number of prizes and awards in the medical field. In 2009, Medtronic, the worlds largest medical device company, acquired the Israeli Ventor, founded in 2004, at a cost of US$ 325 million in cash. Ventors main product is a transcatheter heart valve, which allows non-invasive aortic valve replacement, normally a surgical procedure. Medtronic currently has plans to turn Ventor into a major R&D center in Israel.
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ReWalk, a technology created by Argo Medical Technologies in 2008, is a first-of-its kind commercially available device aimed at helping paraplegics stand, walk and climb stairs. The device is currently undergoing clinical testing, which is nearing completion with promising results, and has recently been featured on the U.S. hit series Glee, raising international awareness. Neurosonix, founded in 2000, specializes in non-invasive medical technology which protects the brain from embolisms during open-heart surgery and other procedures. In 2007 the company received the European Association of Cardiac Surgery Innovation Award for its EmBlocker, which uses ultrasonic energy to non-invasively divert emboli flow away from the cerebral arteries. Dune Medical Devices, founded in 2002, developed MarginProbeTMa cancer probe which delivers real-time breast cancer detection for correct assessment of cancer margins in tissues prior to excision. In a recently completed pivotal trial (April 2011), MarginProbeTM was shown to reduce re-operation rate by 57% due to the correct identification of cancer margins.
StimatixTM GI is a medical device company founded in 2009. It offers a unique sphincter imitation device which helps patients with stomal dysfunction, affecting over 1.5 million people worldwide. In February 2011 the company received an investment of US$ 1.07 million for clinical trials and was named one of the top 10 promising BioMed startup companies at the Israeli ILSI-BioMed 2011 Conference. Enopace Biomedical Ltd, founded in 2008 and currently in seed funding stages, is a company specializing in minimally invasive implantable neurostimulation devices to treat heart failure patients, which amount to approximately 15 million patients in the U.S. and Europe. In a recent funding round (Oct 2011), Enopace received US$ 7 million from the Italian cardiovascular medical device company Sorin Group SlA (BIT: SRN). In-depth profiles of several selected medical device companies can be found in the Selected Company Profiles section of the current report.
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7.3.2
Healthcare IT
Healthcare IT is a thriving life sciences sector in Israel. Israel was one of the pioneers of telemedicine in the world, and today virtually 100% of all primary care physicians in the country utilize computerized systems for storage and processing of patient records, in contrast with only 28% in the U.S. and higher than the most advanced nations such as Denmark and Netherlands (Fig. 17). There are four major health maintenance organizations (HMOs) in Israel, each one of which utilizes standardized electronic health record (EHR) software. Furthermore, both Maccabi and Clalit (the world's second largest HMO) use electronic prescriptions, whereby prescription data is sent directly to pharmacies. Overall, the quality of healthcare and life expectancy in Israel is today en par with the highest-life-quality countries such and Denmark and Sweden. Figure 17. EHR system use by primary care physicians, 2009.
120 100 100 80 60 40 20 0 United States Israel United Kingdom Denmark Sweden Netherlands 28 89 95 100 98
Source: The Information Technology and Innovation Foundation, 2009
At present, roughly 100 companies in Israel specialize in healthcare IT, ranging from telemedicine and biometrics to record storage and processing solutions. Roshtov (TLV:RSTV) is a market leader in medical information systems and EHR management, with a renowned Clicks EHR software, used by a large portion of Israeli physicians to manage and transmit nationwide patient data. Medic4All is an Israeli-based telemedicine pioneer whose technology coverage now spans six countries, with further expansion planned in the near future. Medic4All provides at-home or at-office patient monitoring solutions which help to diagnose and assist patients remotely. One of Medic4Alls recent technologies is a diagnostic wrist bracelet which can be used to continuously communicate patient information, such as heart rate and other vital parameters, to health practitioners via a mobile network. Medic4All has recently partnered with the Australian telemedicine giant iSOFT Group prior to Australia's preparation to introduce mandatory use of electronic health records.
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EarlySense, founded in 2004, is a private medical device and health IT company which specializes in telemedical monitoring of patients in hospital or home beds. The EarlySense technology utilizes a single contactfree sensor placed under a bed mattress to monitor vital patient signs which can aid early discovery and prevention of patient deterioration. Having received major FDA approval in 2010, and a WiFi sensor extension approval in April 2011, EarlySense recently established a Massachusetts office and the sales of its technology have to date been approved in Europe, U.S and, most recently, Canada. In relation to the recent U.S. health bill, one of the primary goals of which is the digitalization of the healthcare industry, the U.S. government is vigorously exploring the options of emulating the successful Israeli EHR model, initially by forming U.S.-Israel health IT partnerships. The first partnership event of this sort took place in May 2011 in Atlanta, Georgiathe world's largest and most prominent health IT hub. The U.S. collaboration is likely to benefit the Israeli healthcare IT industry in the long run. 7.3.3
Biotechnology and Bio-Pharma
Israel's biotech is the second most dominant life science sector, with 130 companies, of which 47 are generating revenue. In terms of the number of private biotech companies per capita, Israel ranks second in Europe. Currently, 31 biotech companies are in the seed stages, 21 companies are in preclinical stages and 31 companies are in clinical stages. The biotech sector rakes in approximately US$ 1 billion a year, and is reported to be growing at a steady rate of 17% by number of companies annually. According to the Israeli human resources company JobInfo, Israel's biotech industry was also the only one to survive the 2008 recession without downsizing. The majority of biotech companies are focused on bio-pharma, tissue engineering and diagnostics (Fig. 18)
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Figure 18. Biotech companiesSubsectors, 2010.

Bioinformatics, Drug Discovery, Proteomics, 7% Antibody, Immunotherapy & Vaccines, 9%
Other, 8%
Natural Materials, 8%
Industrial, 7% Research Equipment, 6% Gene Therapy & Molecular Biology, 5% Biomaterials & Plasma products, 4% Source: ILSI Database, 2010 Diagnostics, 16% Tissue Engineering & Cell Therapy, 15%
Pharma, BioPharma, Biogenerics, 15%
In terms of medical field focus, biotechnology companies focus primarily on cardiovascular health, followed by dermatology and aesthetics (Fig. 19) Figure 19. BiotechnologyMedical Field Focus, 2010
Orthopedic Oral and Dental Ophthalmology Oncology Cardiovascular Other Women's Health
Neurology & Psychiatry Internal Medicine
Genetic Disorders Endocrinology
Dermatology & Aesthetics
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Stem Cell Developments Of the 15 stem cell companies operating in the country, four are currently in clinical trials, one of which is nearing completion. Companies specializing in stem cell products have to date raised nearly US$ 75 million, and are addressing an alleged US$ 40 billion market. Gamida Cell, founded in 1998, is a private company specializing in the development of stem-cell based therapies for the treatment of an array of disorders. The company currently has five products at different stages of the pipeline, with its StemEx product implicated in the treatment of hematological disorders, such as leukemia and lymphoma, at present nearing completion of phase III clinical trials. StemEx is due to be launched on the market in 2013, and is predicted to become the standard leukemia treatment within 10 years by the company's CEO. Cell Cure Neurosciences, a private stem-cell based company established in 2005, is developing unique methods for the treatment of human neurological diseases, with the use of embryonic stem cells. In October 2010 the company entered into an exclusive agreement with Teva Pharmaceutical Industries to develop OpRegenTM product for the treatment of age-related retinal degeneration, which affects nearly 10 million people in the U.S. alone. Concurrently the company also secured a US$ 7.1 million investment in order to initiate clinical trials in humans, which are ongoing at present.
Other Companies CollPlant (TASE: CLPT) is a recombinant protein biotech company which is developing plant-generated human collagen products for tissue repair. Backed by the Office of Chief Scientist and private investors, CollPlant recently entered co-development agreements with several companies, including Edwards Lifesciences and Pfizer Inc. in the areas of cardiovascular health and wound repair. Aposense Ltd (TASE: APOS) is a clinical stage company specializing in detection and visualization of apoptosis (programmed cell death) in the body. The company developed a unique set of molecules which are able to bind and to deliver various nano-markers to apoptotic cells. The Aposense technology is currently in stage II clinical trials, and its major implication is the ability to visualize cell death in response to various treatments, such as cancer drugs. In recent years the company received the Frost + Sullivan Technology Innovation of the Year award and successfully completed an IPO in June 2010, valued at over US$ 230 million. An in-depth profile of Aposense can be found in the Selected Company Profiles section of this report.
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Protalix Biotherapeutics (AMEX:PLX) is a promising biopharmaceutical company whose plant-generated enzyme technology originated at the Yissum TTO of the Hebrew University. Protalix has six products in the pipeline, one of which, a plant-cell-expressed enzymatic treatment of Gaucher disease, is currently awaiting FDA approval. An in-depth profile of Protalix is available in the Selected Company Profiles section of this report. Omrix Biopharmaceuticals is a company specializing in biosurgical and immunotherapy products, targeting areas such as control of bleeding (hemostasis) and treatment of immunodeficiencies and infectious diseases. In 2008 Omrix was acquired by Johnson and Johnson for ~US$ 438 million and currently operates as a stand-alone company reporting through the J & J company ETHICON.
7.3.4
Pharmaceuticals
The pharma sector in Israel is a vibrant scene which has met many successes in the recent past. In addition to drugs of Israeli origin marketed by global multinationals, such as Azilect, Doxil, Exelon and Rebif, and the blockbuster Copaxone , sold by Teva, many smaller Israeli pharma companies are currently attracting global interest. Although the pharma industry in Israel is dominated by the largely generic giants Teva, TARO and Dexcel, it has been estimated that sales of patented drugs in the country totaled NIS 3.09 billion (US$ 829 million) in 2010, which accounted for over 46% of all pharmaceutical sales that year (Fig. 20). The total pharma sales in Israel were reported by the Economist, to be US$ 2.98 billion in 2011 and forecasted to reach US$ 4.31 billion in 2015. Figure 20. 2010 Israeli pharmaceutical sales by sector (US$ million)
Patented drugs, 829
Over-thecounter medicines, 421
Generic drugs, 545
Source: BMI, 2010
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There are 80 pharmaceutical companies currently operating in Israel, the majority of which specialize in drug discovery and drug delivery (Fig. 21). The sector mostly comprises of 27 large, established pharma companies, and 53 relatively young ones, the majority of which have less than 10 employees. Figure 21. Pharmaceutical companiesSubsectors, 2011
Diagnostic Kits 3% Use Patent 5%
Natural Generics Materials 11% 10%
Chemicals 7% Vaccines 4%
Drug Delivery 18%
New Chemical Entity 16%
Drug Discovery 26% Source: ILSI Database, 2010
In terms of medical field focus, the largest portion of companies specialize in cardiovascular health, dermatology and aesthetics, and endocrinology (Fig. 22) Figure 22. Pharmaceuticalsmedical field focus, 2010
Oral and Dental 2% Oncology 4% Neurology and Psychiatry 6% Internal Medicine 7% Gastrointestinal 8% Endocrinology 18% Dermatology and Aesthetics 22% Other 2% Pulmonary Women's Health 1% 1%
Cardiovascular 29%
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Can Fite Biopharma Ltd (TASE:CFBI) is a pharmaceutical company specializing in the discovery of small molecules targeting an array of inflammatory disorders and cancers, based on breakthrough scientific findings. Currently Can Fite has nine molecules in the pipeline, with a Dry Eye Syndrome treatment nearing the completion of phase III clinical trials. Rheumatoid arthritis, Psoriasis and Liver Diseases are some of the other disorders targeted by Can Fites pipeline.
Oramed Pharmaceuticals (OTC:ORMP) is a company specializing in oral delivery of drugs previously only available via injection. The companys oral insulin capsule was demonstrated to be effective in phase II clinical trials, and the compound is due to enter phase II clinical trials in the near future. 7.3.5
Ag-Biotech
With only 13 companies, AgBiotech is an under-represented sector of Israeli life sciences. Despite this, several breakthroughs have put this sector on the charts in recent years, in spheres such as agriculture and biofuels. In October 2011 the leading Israeli bee research company Beeologics was acquired by the global agricultural giant Monsanto. Monsanto will fund and oversee Beeologics research into a deadly disease wiping out bee colonies worldwide. Another Monsanto involvement in Israel is with the crop and biofuels company Evogene. Evogene (TASE:EVGN) and Monsanto entered a fiveyear partnership in 2008 focusing on the improvement of crop yield in corn, soybean, cotton and canola. Evogene boasts exclusive expertise in computational gene discovery, with a number of gene discoveries currently under evaluation by Monstanto. In addition, Evogene entered into collaboration with Bayer CropScience in 2010, aimed at accelerating the development of improved wheat varieties, and with Biogemma (a subsidiary of Limagrain), aimed at the development of drought-resistant corn.
7.4 Life Science Exports

Developmental stage companies in Israel have had a significant number of exits in the last decade, and have been able to target large foreign markets as a result of successful partnerships with global multinationals. Exports of life science products are responsible for a staggering majority of all sales, thus it is imperative that Israel continues to focus on building strong relationships with its trading partners. 80% of all exports in Israel are covered by the free trade agreements mentioned in chapter 3.4.
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In Q1 of 2010, Israeli life science exports rose by 14% in contrast with 2009. In 2009 roughly 71% of all life science exports were sent to North America, constituting US$ 4.3 billion, and 21% to the European Uniona significant increase from previous years. 265 life sciences companies have exported their products in 2009, the majority of these generated foreign sales of between US$ 100,000 and US$ 2 million, and roughly a third generated sales of US$ 2 to 10 million.
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8. State of Investment in the Life Sciences

According to Dan Senor, the author of Start-up Nation, Israeli startups attract more venture capital dollars per capita than any other country2.5 times the U.S., 30 times Europe, 80 times India, and 300 times China. In 2007 the Global Competitiveness Index placed Israel second in the world by venture capital availability in the life sciences. Finally, according to Globes Israeli Business news, in May 2011 VC investment in the life sciences was fully back to pre-crisis levels. Despite these encouraging facts, lack of funding remains the most quoted issue in startup survival, in particular in seed funding stages. Deal sizes and local venture funds are small in Israel in comparison with the U.S.: seed investments in biotherapeutics average between US$ 2 and 3 million in Israel, in contrast with US$ 10 to 15 million in the US. Furthermore, startups have not been able to attract desirable levels of interest from foreign investors.
8.1 Venture Capital Raised

In 2010, 28%, or US$ 350 millionthe largest share of capital raised in Israel was attributed to life sciences (Fig. 23), followed by communications and the internet. Having superseded the communications sector in 2005, life sciences remained the largest sector by availability of capital until 2011 (Fig. 24). In Q1 of 2011 capital raised by life sciences remained at 27% of total capital raised by the hi-tech sector, at US$ 127 million, with a reported 7% increase in seed stage funding. However, by Q3 of 2011 life sciences lost out to the internet sector, and currently stands at 20% of total capital raised this year, which amounts to a significant US$ 350 million over three quartersexhibiting an increase of 28% from Q3/2010. Figure 23. Capital Raised by Israeli Life Science Companies 2005-2010, (US$ million)
400 350 300 250 200 150 100 50 0 2005 2006 2007 2008 2009 2010 284 369 351 318 272 350
Source: IVC & KPMG Capital Raising Report, 2011
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Figure 24. Capital raised by hi-tech companies by sector, 2001-2010 (%)

100 90 80 70 60 50 40 30 20 10 0 16 9 4 9 2001 15 4 12 14 2002 18 4 11 15 2003 22 4 10 13 2004 23 21 3 12 12 2005 5 10 16 2006 19 4 8 2007 15 14 13 15 4 7 2008 8 7 5 2009 13 6 4 2010 18 42 37 33 29 35 24 20 15 24 20 18 19 22 17 22 13 20 12 23 19 Software 25 20 28 Communications Life Sciences Internet Semiconductors Cleantech Other
21
62% of the capital raised in the life sciences in 2010 was attracted by the field of medical devices, down 4% from previous years. A substantial increase in capital raised was observed in the pharma sector, attributed to a number of large dealsinvestment in this sector was up 18% from 2009 (Fig. 25). Figure 25. Capital raised by Israeli Life SciencesSubsectors, 2008-2010
80% 70% 60% 50% 40% 32% 30% 20% 10% 0% 2008 Source: BDO Israel, 2011 2009 2010 8% 6% 8% 4% 3% 31% Diagnostics Other Life Sciences Pharmaceuticals Medical Devices 54% 66% 67%
13% 13%
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The majority of capital raised in seed stages originates from Israeli VCs, whilst foreign investment is normally attracted at subsequent stages. In the hi-tech sector overall, 30-40% of capital is derived from local VCs, with foreign and other investors picking up the rest of the tab (Fig. 26). Foreign investment has been on the increase in recent years, likely due to the foreign investment incentives programs put forth by the government, described in chapters 3 and 5. Israeli VC deals have been decreasing due to diminishing funds, which are not predicted to bounce back until 2012. Figure 26. Hi-tech sector investment by Israeli and foreign investors
Israeli VCs Foreign Investors & Other
59%
58%
58%
55%
51%
60%
61%
62%
63%
70%
41%
42%
42%
45%
49%
40%
39%
38%
37%
30% 2010
2001
2002
2003
2004
2005
2006
2007
2008
2009
Source: IVC Research Center, 2010
In Q3 of 2011 a 7% increase in seed stage funding was reported for Hi-Tech companies, currently amounting to 9%the highest level in a single quarter since 2008 (Figs 27 and 28). Despite the visible increase, seed stage funding remains a cause for concern. In the U.S. seed-, or valley of death-stage funding is available from the National Institute of health. In Israel no such funding mechanism existed until recent OCS initiatives, such as KAMIN, specialized biotech incubators and the novel OCS biotech fund (see section 6.1). Although government efforts to aid companies in seed stage funding are welcomed in the industry, it is evident that more needs to be done on behalf of the OCS. Furthermore, because most life science start-ups are spun out of universities by researchers, there is an apparent lack of managerial expertise in early stage ventures. It has been suggested that recent increases in seed stage funding are likely to be attributed to experienced entrepreneurs who have succeeded in raising funds previouslya number of which is on the increase, as opposed to novice entrepreneurs.
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Figure 27. Capital Raised by Hi-Tech Companies by Stage, 2001-2009

100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 9% 2001 13% 2002 12% 2003 11% 2004 19% 2005 22% 21% 16% 2008 16% 2009 54% 49% 56% 53% 42% 38% 38% 49% 46% Seed Early Stage Mid Stage Late Stage 35% 32% 24% 28% 30.5% 32% 36% 29.5% 35% 2% 6% 8% 8% 8.5% 8% 5% 5.5% 3%
2006
2007
Figure 28. Capital Raised by Hi-Tech Companies by Stage, Quarterly 2010/2011

100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Q3/10 Q4/10 Q1/11 Q2/11 Q3/11 19% 15% 23% 27% 23% 48% 41% 50% 44% 41% Seed Early Stage Mid Stage Late Stage 32% 42% 24% 27% 27% 1% 2% 3% 2%
9%
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8.2 Public Companies and IPOs

Initial Public Offerings (IPOs) are a recurring trend in Israel for companies facing hardship in obtaining funds privately. Today, Israel has more companies trading on the NASDAQ than any country other than the United States and China (Fig. 29). On the Tel Aviv Stock Exchange (TASE), life sciences is the largest sector, with 57 companiesmore than on the majority of similar-size markets around the world. Several of the TASE life science companies are dually listed on foreign markets. In 2006 TASE established looser guidelines for research-based companies, resulting in an everincreasing number of early-stage life science IPOs, with 5 companies going public in Israel this year alone. Figure 29. Selected foreign companies listed on the NASDAQ, 2010
180 160 140 120 100 80 60 40 20 0
Source: NASDAQ
The TASE biomed index was launched in March of 2010 and has since seen two major dips (Fig. 30). The index features life science companies with an average market value of at least NIS 50 million (~US$ 14.5 million), liquidity of at least NIS 25 million (US$ 7.5 million), and a minimum holding of 20% by the public. Currently the index comprises of companies such as Aposense, CollPlant, Evogene and Given Imaging, mentioned in this report. Despite the ample potential of the technologies showcased in the index, investors remain cautious due to under-exposure, non-transparency and general lack of knowledge about the traded companies. As a result, due to lack of sufficient analyst reporting, public companies in Israel are likely to be significantly under-valued. In an attempt to confront these issues, TASE is working to introduce more accurate reporting and to raise awareness of the public life science sector. As part of these efforts, the stock exchange is co-sponsoring a novel study program at Tel Aviv Universitys faculty of management, titled The Analysis of Healthcare Companies. In addition, a number of high-profile investor conferences have been organized by TASE in the U.S., in conjunction with NASDAQ.
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Figure 30. Performance of the TASE-BioMed Index, 2010-2011
Source: Tel Aviv Stock Exchange
8.3 Mergers and Acquisitions

Israel has seen a significant number of high-profile M&As in recent years. The global generics giant Sun Pharmaceutical acquired a controlling stake of the Israeli Taro Pharmaceuticals in the 2007 US$ 457 million takeover. In a similar bid, the multinational nutritional and nonprescription giant Perrigo acquired the Israeli generics company Agis Industries for US$ 900 million in 2004, and J&Js Ethicon division acquired Omrix, covered earlier in this report, for US$ 438 million in 2008. A list of several noteworthy M&As is shown in table 4. Table 4. Selected recent mergers and acquisitions of Israeli companies Year Acquirer Israeli Company 2010 2010 2010 2010 2009 2009 2008 2008 2008 2008 2007 2007 2006 2006 2006 2004 Alcon Inc. Roche Holding AG Essilor Abbott Labs Medtronic Boston Scientific Johnson & Johnson St. Jude Teva Nobel BioCare Sun Pharmaceuticals Candela Kyphon Johnson & Johnson Stryker Perrigo Optonol Medingo Shamir Optical Industry StarLIMS Ventor Labcoat Omrix MediGuide CoGenesys Alpha BioTech Taro Pharmaceuticals Inolase Disc-O-Tech Colbar Sightline Agis
Sum (US$ millions) 180 160 130 123 325 100 438 283 100 95 457 150 220 159 140 900
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Despite a decreasing number of large M&As in the past three years, M&As and IPOs remain the leading source of capital for hi-tech companies in Israel (Fig. 31), underlining the increasing need for venture capital investment. Figure 31. Capital derived from investors vs. capital derived from M&As and IPOs for Israeli Hi-Tech Companies, 2001-2010 (US$ Billion)
12 Capital derived from M&As and IPOs Capital derived from Investors 8 10.5
10
6 4 2.6 2.08 2.6 1.12 2.1 1.3
4 2 2 0.6 0 2001 2002 2003 2004 2.1 1 1.1 1.01 2.5 1.5
3.5 1.62
1.3
1.76
2005
2006
2007
2008
2009
2010
Source: IVC Research Center, 2010
8.4 Increasing Multinational Interest

In recent years many global multinationals have recognized the untapped potential of a country which finds itself at the high end of the spectrum in terms of scientific capital, yet is at the low end of financial capital. Beside existing private and public investment, Israeli companies have been attracting increasing interest from global funds and international R&D companies alike. Furthermore, a large number of multinationals are establishing R&D centers and venture capital funds in Israel. A visible R&D shift emerging globally, and perceptible in Israel, is the increase in multinational attempts to emulate the university tech transfer system. As part of this shift global R&D companies are establishing venture funds and bio-incubators in R&D-intensive areas of the globe, in hopes to seize promising academic development ahead of the competition. A list of some of the global companies currently invested in Israel is shown in table 5. Despite the global interest, it is important to note that no major pharma multinationals have established R&D centers in Israel as of yet, with most R&D scouting occurring through merged or acquired companies in Israel.
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Table 5. Selected multinationals currently invested in Israel
US MICROSOFT INTEL AOL TIME WARNER GE HEALTHCARE HEWLETT PACKARD LUCENT 3COM CISCO SYSTEM IBM EPIX STRYKER MOTOROLA KODAK JOHNSON & JOHNSON DENTSPLY SUN MICROSYSTEMS
Source: IVC Research Center
EUROPE SAP NESTLE PHILIPS MEDICAL ALCATEL GENERALI CABLE & WIRELESS DEUTSCHE TELECOM TELECOM ITALIA SIEMENS UNILEVER MERCK SERONO VEOLIA DANONE LOREAL VILMORIN FERRING
ASIA SAMSUNG ELECTRONICS NOMURA SUMITOMO TRADING HONDA FUJI TOYO INK SONY DAEWOO HYUNDAI ACER COMPUTERS LG GROUP MACRONIX WINBOND HUTCHISON TELECOMM SCIGEN SUN PHARMACEUTICAL
Multinational interest is omnipresent in the Israeli life science arena. In a recent Biomed 2011 conference held by the Israeli biotech industry, amongst the attendees were names such as Abbott Laboratories, Hoffman-LaRoche, Vetter, and J&J. In a recent bid, Orbimedthe worlds largest life science fund, established a US$ 203 million fund in Israel in conjunction with the OCS, which contributed US$ 40 million. The fund will have a particular focus on bio-pharma and bio-med and will look to sponsor 10-15 startups. General Electric is due to open its eighth R&D facility in Haifa, at an investment of US$ 3-5 million, with a particular focus on basic research in medical devices. One of the new facilitys primary goals will be to establish closer links with Israeli academia. In March 2011 Merck Serono established a strategic bioincubator fund in Israel worth 10 million at its initiation. The fund will provide seed capital and Mercks own R&D facilities for bio-startups. En par with the multinational trend, the focus of the fund will be to bolster the companys links with academia. Other pharma multinationals, such as GSK and Eli Lilly, have not yet established facilities or funds in Israel but are actively scouting molecules and technologies in the country through their global venture funds such as the Lilly Fund and GSKs SR1 health venture fund. Finally, many multinationals choose to partner with Israeli TTOs directly, as in the case of Aurum Ventures MKI partnering with the Yissum TTO on the development of a nanotechnology delivery platform, and the exclusive worldwide agreement between Yissum and Neurocrine Biosciences for the development of valnoctamide stereoisomers.
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9. Conclusion
All in all, the life science industry in Israel presents an attractive investment opportunity due to the unique combination of entrepreneurial human capital and dedicated government support in the country. As demonstrated by the successes of the Israeli high-tech industry, the combination of entrepreneurial creativity and technical know-how is a potent mix; however, there is a dire need for the potential to be complemented with appropriate finances. Under the right circumstances, with a certain availability of venture capital, life sciences in Israel have the potential to expand in size and market value to match the previous successes of the high-tech industry.
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10. Selected Company Profiles

The following section presents a number of companies which Bioassociate finds to be promising investment opportunities. The companies are in clinical stages of development and have all shown promising results to date.
10.1
Private Companies
VBL Therapeutics
www.vblrx.com
VBL Therapeutics, founded in 2000, is a clinical-stage venturebacked biotechnology company targeting immuneinflammatory diseases and cancer. The company has more than 70 granted patents and more than 110 applications pending. The company pioneered the Lecinoxoid class of novel oral antiinflammatory agents. VB-201, the lead candidate currently in phase II clinical trials, targets psoriasis, a chronic disease that affects an estimated 125 million people worldwide. Preclinical studies indicate that VB-201 also has significant potential to treat inflammation across other chronic inflammatory diseases including rheumatoid arthritis, atherosclerosis, inflammatory bowel disease and multiple sclerosis. The VBL Pipeline
VBL Therapeutics proprietary award-winning Vascular Targeting System (VTS) technology platform has also yielded VB-111, a dual-action, anti-angiogenic and Vascular Disruptive Agent (VDA) for cancer. VB-111 has successfully completed Phase 1/2a single dose clinical trials in cancer patients, and has recently entered Phase 2 clinical trials in thyroid cancer and glioblastoma. Some of VBLs investors include Keffi Group, Aurum Ventures and Pitango.
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BrainsGate
www.brainsgate.com
Established in 2000, BrainsGate is a medical device company committed to developing innovative therapies for patients suffering from Central Nervous System (CNS) diseases. BrainsGate's platform technology involves electrical stimulation of the Spheno-Palatine Ganglion (SPG), a nervous center known to increase cerebral blood flow. BrainsGate is exploring several applications for its technology, and is currently focusing on two directions: treatment of acute ischemic stroke, and chronic SPG stimulation to treat vascular dementia patients. Building on its technology, the company has developed the Ischemic Stroke System (ISS), based on a miniature electrode implanted at the roof of the mouth in a minimally invasive, local anesthesia procedure comparable to dental treatment. In 2008, the Company has completed ImPACT-1, a pilot clinical trial for acute ischemic stroke with promising results. BrainsGate is currently running the ImpACT-24b, a multi-national, randomized, double-blind, sham-controlled pivotal study to assess the safety and efficacy of its treatment for stroke patients in a 24-hour window. BrainsGate's investors include Johnson & Johnson, Boston Scientific, Elron Electronics Industries, Pitango Venture Capital, Alice Ventures, Agate Medical Investments, Infinity Ventures and Cipio Partners. BrainsGate is headquartered in Caesarea, Israel.
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Chiasma
www.ChiasmaPharma.com Chiasma develops new oral drug products based on its proprietary TPE (Transient Permeability Enhancer) System. The TPE enables oral delivery of macromolecules (up to 20 kDa in size) and poorlyabsorbed small molecules through the intestine wall into the systemic circulation. With the use of the TPE System, certain injectable drugs can be switched to oral formulations, with the possibility of establishment of new indications for them, thereby creating new products. Chiasmas pipeline includes novel drugs which address unmet needs for well-defined markets with clear commercial opportunities. Chiasmas lead product is the investigational new drug Octreolin, an oral form of octreotide acetate being developed first for the oral treatment of acromegaly, a hormonal disorder that results from an excess of growth hormone. Four clinical studies in healthy volunteers were completed successfully and have demonstrated a PK profile similar to that of the commercially available subcutaneously injected octreotide acetate as well as a pharmacodynamic (PD) effect of reducing growth hormone. No serious adverse safety events were reported in any of the studies. Pivotal studies (Phase 3) in acromegaly are expected to begin enrollment in Q4 2011. Several other developments underway at Chiasma are shown in the companys pipeline below.
Chiasma is backed by MPM Capital, ARCH Venture Partners, F2 Ventures and 7-Med Health Ventures.
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10.2
Public Companies
BioLineRx| NASDAQ/ TASE: BLRX

www.BioLineRx.com
BioLineRx is a clinical-stage, publicly-traded, biopharmaceutical development company based in Jerusalem. The Company's declared aim is to develop products suitable for today's pharmaceutical market satisfying an unmet medical need or exhibiting features and benefits above those of current therapies. BioLineRx's close ties to technology transfer offices, research institutes, academic institutions and biotechnology companies, both in Israel and around the world, enable access to promising compounds at an early stage. The BioLineRx business model involves three stages- "Bench to Bedside to Partner". The first stage involves a stringent selection process. BioLineRx's expert team is particularly specialized at evaluating potential drug candidates from both scientific and marketing perspectives. Next, BioLineRx performs development through Phase II proof of concept studies. Finally, BioLineRx partners with pharmaceutical companies to complete the clinical development and bring the product to market. BioLineRx also operates BioLine Innovations Jerusalem (BIJ) a biotechnology incubator to evaluate and develop pre-clinical therapeutic candidates, and an Early Development Program (EDP) dedicated to identifying and advancing promising early stage programs. The current development pipeline consists of five clinical therapeutic candidates: BL-1020, a New Chemical Entity indicated for the treatment of schizophrenia (Phase II/III commenced); BL-1040, a medical device developed for the prevention of cardiac remodelling in Acute Myocardial Infarction patients (Phase I/II clinical trial completed, pivotal trial commencing in the fourth quarter of 2011) BL-5010, a novel formulation for non surgical removal of skin lesions (Phase I/II clinical trial completed); BL-1021, a new chemical entity for neuropathic pain ( Phase I commenced) and BL-7040, a novel, orally available synthetic oligonucleotide for the treatment of inflammatory bowel disease (phase I completed).
Nine additional compounds are currently in the pipeline at various stages of pre-clinical development.
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The BioLineRx Pipeline
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Aposense| TASE: APOS

www.ApoSense.com Aposense is a clinical stage molecular imaging and drug development company, with a pipeline of products based on its patented platform technology for targeting apoptosis (programmed cell death) in vivo. Aposense is translating the science of Apoptosis into personalized patient care in multiple disease categories, including oncology, cardiology and neurology. Targeting of this biological process in-vivo opens opportunities for real-time clinical imaging of disease activity and targeted therapy. The companys product pipeline is based on a patented Aposense platform technology, comprising a set of rationally-designed, small molecules, which selectively identify cells from the early stages of apoptosis, cross the membrane and accumulate within the cell. The small weight molecules have a versatile structure, making them amenable to attachment and delivery of various imaging or therapeutic moieties to the apoptotic cells. These molecules can serve as a platform for imaging apoptotic cells and tissues or for targeted delivery of an active drug. The Aposense molecules track apoptotic cells, regardless of cell type and apoptotic trigger, and at the same time avoid interaction with healthy cells. As a result, these molecules have high sensitivity and specificity of targeting of apoptotic cells. [18F]-ML-10 is the Aposense lead compound for the molecular imaging of apoptosis with PET (Positron Emission Tomography). It is labeled with the radio-isotope 18F, the most commonly used isotope in PET imaging, which enables tracing of the ML-10 molecules in vivo as they localize in the target lesion or tissue. [18F]-ML-10 is an investigational agent, not yet approved by the FDA, and is now in phase II clinical trials. Aposense is partnered with Teva, IBA (Ion Beam Applications), Sigma-Aldrich and some of its shareholders include Clal Biotechnology Industries, Pontifax, J & J, Ziegler-Meditech Equity Partners and Docor International. The Aposense Pipeline
Oncology (Phase II) An Open-Label, Multi-Center Study to Evaluate the Efficacy and Safety of [18F]-ML-10 as a PET Imaging Radiotracer, in Early Detection of Response of Brain Metastases of Solid Tumors to Radiation Therapy Oncology (Phase II) An Open-label Phase II Study, to Evaluate [18F]-ML-10 as a PET Imaging Radiotracer for Early Detection of Response of Brain Metastases to Whole-Brain Radiation Therapy Stroke (Phase II) An Open-label Phase II Study to Assess the Suitability of [18F]-ML-10 for Imaging of Cell Death in the Region of the Cerebral Infarct in Patients With Ischemic Stroke Using Positron Emission Tomography (PET) Imaging Healthy volunteers (Phase I) An Open-label Phase I Study to Assess Safety, Dosimetry and Biodistribution of 18F-ML-10 in Healthy Volunteers
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Intec Pharma|TASE: INTP

www.IntecPharma.com Intec Pharma is a drug development company focused on a gastric retention technology to develop improved formulations of existing drugs. The drugs that were selected to be improved had at least one of the following characteristics: Low bioavailability, Significant side effects, Poor efficacy and Frequent dosing. Controlled release delivery systems failed to provide a solution for the selected drugs, because they are absorbed primarily through the upper part of the gastrointestinal track. Intec Pharma targets significant unmet needs for various therapeutic areas, including the central nervous system (CNS), the cardiovascular system, as well as gastrointestinal (GI) and infectious diseases.
Levodopa GR for Parkinson's disease Since its introduction in the 1960s, Levodopa (LD) has been the most widely used and the most effective drug for the symptomatic therapy of Parkinson's disease (PD). However, to date, a satisfactory sustained-release formulation of Levodopa has not been possible. The Accordion Pill Carbidopa/Levodopa (AP-CD/LD) is a designated oral delivery platform developed by Intec Pharma Ltd. The AP-CD/LD is designed to stabilize Levodopa plasma levels and thereby bring about, for the first time, a dramatic reduction in motor complications and reduce the frequency of daily dosing, using oral treatment. To date, clinical trials of this formulation have demonstrated significantly improved absorption and efficacy of the drug in Parkinsons patients. Zaleplon GR for Insomnia Current epidemiological data suggest that insomnia is one of the most common CNS disorders, affecting one-third of the general population and a potential US$ 6.8 billion market. Zaleplon is the fastest and shortest acting drug of its class of insomnia medication. It is absorbed rapidly, and is rapidly cleared from the blood. Accordingly, it is associated with rapid sleep induction and has minimum next-day residual effects. The Accordion Pill enables a continuous duodenal infusion of Zaleplon throughout the night, thereby prolonging the absorption phase and keeping a sufficient blood concentration for sleep maintenance over night. Promising results have been demonstrated in clinical trials of the Accordion Pill Zaleplon to date. In a September 2011 rights issue, Intec secured a 99.96% order of the offered rights, raising US$ 10.8 million. Some of Intecs major shareholders include Clal Finance, Phoenix Provident Fund, Migdal Mutual Funds, Tamir Fishman Mutual Funds, Meitav mutual funds and IBI Mutual Funds.
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Protalix Biotherapeutics|NYSE-AMEX:PLX, TASE:PLX

www.Protalix.com Protalix is a biopharmaceutical company focused on the development and manufacturing of recombinant therapeutic proteins through its ProCellEx plant focused on the cell-based development protein and expression system. Using ProCellEx, Protalix is commercialization of a proprietary pipeline of novel and biosimilar proteins that target large, established pharmaceutical markets and that rely upon known biological mechanisms of action. Protalixs initial commercial focus is on complex therapeutic proteins for the treatment of genetic disorders, such as Gaucher disease and Fabry disease. The Company is also advancing additional recombinant biopharmaceutical drug development programs, including a TNF inhibitor for inflammatory diseases. Protalixs lead product candidate, taliglucerase alfa for Gaucher disease, is partnered with Pfizer for worldwide development and commercialization, excluding Israel, where Protalix retains full rights. A New Drug Application (NDA) has been filed with the United States Food and Drug Administration (FDA) for taliglucerase alfa based on positive data from the pivotal Phase 3 trial, and was granted a February 1, 2012 action date under the Prescription Drug User Fee Act (PDUFA). Applications have also been submitted for Europe, Israel, and Brazil, with additional regulatory submissions in progress. The Protalix Pipeline
PRX-102 is a proprietary plant cell-expressed recombinant alpha-Galactosidase-A enzyme for the potential treatment of Fabry disease, a rare genetic lysosomal storage disorder. Fabry disease affects more than 8,000 people globally, representing a specialty clinical niche with the potential for high growth. PRX-102 is intended to be an improved version of the currently marketed Fabry disease enzymes, Fabrazyme and Replagal, with potentially less immunogenicity and improved substrate clearance.
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PRX-105 is a plant cell-expressed PEGylated recombinant human Acetylcholinestrase (AChE) for potential use in the biodefense arena as a therapeutic and prophylactic countermeasure for nerve agents attack. PRX-105 functions as a natural "bioscavenger, like a sponge, to bind poisons before they cause neurological damage. In preliminary clinical results dated October 2011, PRX-105 was shown to have a potential role in Parkinsons disease. This development program is under license agreement with Yissum Research and Development, and with the Boyce Thompson Institute, Inc., affiliated with Cornell University. PRX-106 is a plant cell-expressed recombinant anti-TNF fusion protein being developed to potentially address autoimmune indications, including rheumatoid arthritis. The fusion protein consists of the soluble form of the human TNF receptor (TNFR) fused to the Fc component of a human antibody IgG1 domain. Major shareholders of Protalix include Vanguard, Federated Kauffman Fund, Fidelity, Allianz RCM, and AST Federated Aggressive Growth Portfolio.
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Mazor Robotics|TASE: MZOR

www.MazorRobotics.com Mazor Robotics is a leading innovator in robotic-guided spine surgery, originated at the T3 Tech Transfer Office of Technion University. Mazor Robotics flagship Renaissance Surgical Guidance System is transforming spine surgery from freehand procedures to highlyaccurate, state-of-the-art robotic-guided procedures that raise the standard of care with better clinical outcomes. Based on surgeons experience with SpineAssist in over 2,000 procedures worldwide (over 12,000 implants), Renaissance Surgical Guidance System is powered by clinically validated technology, having demonstrated 98% accuracy in recent peer review publications. The systems quick learning curve enables surgeons to leap over the barriers of performing challenging cases and approaches such as minimally invasive surgeries, which are notorious for their learning curve, suboptimal outcomes, higher radiation levels and longer operation times when performed freehand. Renaissance is in daily use in leading hospitals with thousands of successful cases worldwide. The Companys pipeline includes innovative products that will reshape the art of surgery. Among some of these developments are a unique, minimally invasive spinal stabilization procedure which is enabled by Renaissance, an intraoperative 3D imaging system which is an add-on to C-arms (operating room imaging systems), and expanding clinical applications such as cranial procedures, ie, cranial biopsies and deep brain stimulation implant placements). Currently, major shareholders of Mazor include Clal Finance Mutual Funds, Migdal Provident Funds, Menora Mivtachim Mutual Funds and Tamir Fishman Mutual Funds.
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References
"BDO: Doing Business in Israel 2011." BDO Israel--Ziv Haft. 2011. Web. 11 Nov. 2011. http://www.bdo.co.il/ . "Beyond Borders: Global Biotechnology Report 2011 - Ernst & Young - Global." Ernst & Young. 2011. Web. 11 Nov. 2011. http://www.ey.com/GL/en/Industries/Life-Sciences/Beyond-borders-global-biotechnology-report-2011 . BioIsrael - Israel's Life Sciences On-Line. Web. 11 Nov. 2011. http://www.bioisrael.com/ . Central Bureau of Statistics Israel. Government of Israel, 2011. Web. 11 Nov. 2011. http://www1.cbs.gov.il/reader/cw_usr_view_Folder?ID=141 . "Doing Business In Israel." Ernst & Young. May 2011. Web. http://www.ey.com/Publication/vwLUAssets/Doing-business-in-Israel-brochure/$FILE/Doingbusiness-in-Israel.pdf . Feldman, Ami. "Israels Life Sciences Industry Overview." Life Science OpenSpace. MATIMOP: Israeli Industry Center for R&D. http://www.lifescienceopenspace.com/wp-content/uploads/2010/09/Israel-LifeSciences_OraDar_10_09_10_poland.pdf. "Invest in Israel: Israel's Investment Promotion Center at the Ministry of Industry, Trade and Labor." Www.investinisrael.gov.il. Web. 11 Nov. 2011. http://www.investinisrael.gov.il/ . "Israel Pharmaceuticals and Healthcare Report Q3 2011 by Business Monitor International in Country Overviews, Israel, Country Overviews." Market Research Reports - Business Market Research Reports & Industry Analysis. July 2011. Web. 11 Nov. 2011. http://www.marketresearch.com/Business-Monitor-International-v304/Israel-PharmaceuticalsHealthcare-Q3-6468075/ . Israel Science and Technology Homepage. Web. 11 Nov. 2011. http://www.science.co.il/ . "Israel: Country Web Pages." Organisation for Economic Co-operation and Development. Web. 11 Nov. 2011. http://www.oecd.org/country/0,3731,en_33873108_39418575_1_1_1_1_1,00.html . Matimop Israeli Industry Center for R&D: Office of the Chief Scientist. Web. 11 Nov. 2011. http://www.matimop.org.il/ . Menipaz, Ehud, Yoash Avrahami, and Miri Lerner. "National Entrepreneurship Report: Israel." GEMS Consortium. Web. 2 Nov. 2011. http://www.gemconsortium.org/download/1321019155046/Israel%20GEM%2007%20Report%20fi nal.pdf . "Patenting By Geographic Region (ISRAEL), Breakout By Organization, CY 1969 - 2010." United States Patent and Trademark Office. Web. 11 Nov. 2011. http://www.uspto.gov/web/offices/ac/ido/oeip/taf/asgstca/ilx_ror.htm . "Science, Technology and Innovation Indicators in Israel: An International Comparison." Samuel Neaman Institute For National Policy Research. 2010. Web. 1 Nov. 2011. http://www.neaman.org.il/Neaman/UpLoadFiles/DGallery/2770181985.pdf .
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"Taxation and Investment in Israel 2011." Deloitte. 2011. Web. 1 Nov. 2011. http://www.deloitte.com/assets/DcomGlobal/Local%20Assets/Documents/Tax/Taxation%20and%20Investment%20Guides/2011/dttl_tax _guide_2011_Israel.pdf . "Thomson Reuters | National Science Indicators | Science." Thomson Reuters | Home. 2010. Web. 11 Nov. 2011. http://thomsonreuters.com/products_services/science/science_products/az/national_science_indicators/ .
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Bioassociate
Contacts
Bioassociate 1 Azrieli Tower 132 Menachem Begin St. Tel Aviv 67021 ISRAEL info@bioassociate.com www.bioassociate.com Tel: +972 3 541 5050 Fax: +972 3 716 4965
About Bioassociate
Bioassociate is an Israeli based company established in 2008 and operating in the Israeli life sciences arena. Bioassociate provides expertise-based consulting and research services to private investors, investment banks, institutional investors and any other investment entities interested in the pharmaceutical, biotechnology and life science sectors. Bioassociate structures its teams with multidisciplinary members to conduct specific assignments. Each team is combined of a life science professional that brings an extensive knowledge and experience in the biotech field, and a financial professional with years of experience in the life science sector. This leads to reports that have a deep scientific understanding on one hand, and strong financial meaning on the other hand. The Bioassociate team has industry experience as well as consulting and research track record, ensuring that projects are delivered with both professionalism and real-world relevance. Bioassociate Consulting & Management Ltd.

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Bioassociate

Biotech Business Consulting

Investing in the Israeli Life Sciences Industry 2012

One direction. One goal. Profit.

Investing in the Israeli life sciences industry 2012

One direction. One goal. Profit.

Investing in the Israeli Life Sciences Industry

Published by: Bioassociate Consulting & Management Ltd. January 2012

Investing in the Israeli life sciences industry 2012

Bioassociate Consulting & Management Ltd.

Bioassociate Consulting & Management Ltd.

Investing in the Israeli life sciences industry 2012

Bioassociate Consulting & Management Ltd.

Investing in the Israeli life sciences industry 2012

2. Israel: Quick Facts

6.4% of total population (18-64) are entrepreneurs

Bioassociate Consulting & Management Ltd.

Investing in the Israeli life sciences industry 2012

3. Business & Investing Environment

Bioassociate Consulting & Management Ltd.

Investing in the Israeli life sciences industry 2012

Bioassociate Consulting & Management Ltd.

Investing in the Israeli life sciences industry 2012

Royalties (%) 5 5 0 5/7 0 5 10 5/15 10 10 0 (15) 10/15 5/10 5/15

Bioassociate Consulting & Management Ltd.

Investing in the Israeli life sciences industry 2012

3.3 Stock Exchange

3.4 Trade Agreements

3.5 Intellectual Property

Bioassociate Consulting & Management Ltd.

Investing in the Israeli life sciences industry 2012

4. Israeli Life Sciences: Competitive Edge

Dynamic start-up arena

Established success in innovation

Bioassociate Consulting & Management Ltd.

Investing in the Israeli life sciences industry 2012

5. Israeli Life Sciences Research and Development

Figure 1. R&D Expenditure as percentage of GDP amongst top spenders

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Eng & Arch

Math & CompSci

Source: Central Bureau of Statistics Israel

Bioassociate Consulting & Management Ltd.

Source: Central Bureau of Statistics Israel

Figure 4. HERD funding by financing sector, 1998-2007

Bioassociate Consulting & Management Ltd.

Investing in the Israeli life sciences industry 2012

5.3 Quality and Outputs of Basic Research

Figure 5. Top world PCT filings by ownership type

Source: WIPO, 2010

Bioassociate Consulting & Management Ltd.

Investing in the Israeli life sciences industry 2012

Figure 6. USPTO Patent grants to Israeli Universities 2007-2010

Bar-Ilan Uni. 9 Carmel-Haifa Uni. 3 Ben Gurion Uni. 18

Figure 7. Scientific publications per 100,000 population, 2004-2008

Source: Thomson Reuters Scientific

Bioassociate Consulting & Management Ltd.

Investing in the Israeli life sciences industry 2012

Bioassociate Consulting & Management Ltd.

Investing in the Israeli life sciences industry 2012

Bioassociate Consulting & Management Ltd.

Investing in the Israeli life sciences industry 2012

Bioassociate Consulting & Management Ltd.