Teva VP Ika Abravanel resigns
Ben-Haim is a controversial figure who has made the Israeli life sciences industry the success it is today.
About a year ago, Shlomo Ben-Haim gave his daughter's hand in marriage in a fruit orchard near Haifa. Granted it was not as ostentatious as Yitzhak Tshuva's son's wedding, but similar to many of the weddings of children of the upper class that are held in nature - the monetary investment in creating a modest and unpretentious atmosphere is quite large.
The guests remember that Ben-Haim smiled sheepishly when some of the guests' high heels dug into the soft ground of the orchard. "The children made all the decisions," Ben-Haim apologized. "I am just a guest."
Ben-Haim tends to respond in the same manner when asked about the harsh way he manages negotiations with potential buyers or with his employees. "I have four children to support," he says, and then smiles his polite, seemingly modest smile that shows that he holds himself in high esteem.
Don't be misled. Ben-Haim is one of the richest people that have emerged from the Israeli high-tech sector. So far, he has been involved in exits worth more than $1 billion in the medical device field, and it is believed that he has made more than $200 million for himself, making him one of the people responsible for building up this industry.
"He has this way of telling about tremendous successes as if they were no big deal," says an investor who used to be close to Ben-Haim. "It's very nice." But not everyone thinks that he is so nice. In October, Eran Ben-Shmuel and Alexander Bilchinsky of RF Dynamics Ltd. filed a lawsuit against Ben-Haim, who was a leading investor in their company. They claim that Ben-Haim is a wealthy and powerful person who acted in "an extremely deceitful and fraudulent way."
The lawsuit describes Ben-Haim's conduct as befitting a gangster, including putting Ben-Shmuel's belongings into a garbage bag and throwing it in front of his house, forbidding the plaintiff to enter the company's offices, and sending SMS messages to employees "saying that the plaintiffs are thieves and were therefore fired from their jobs." Ben-Haim responded, "A suit has been filed against them that is being arbitrated in Labour Court since they unlawfully took funds from the company."
Lawsuits by entrepreneurs against investors are a common occurrence in the high-tech industry, but in the case of Ben-Haim, there has been a lot of them. Ben-Haim was sued in 2004 by Radiancy (which is currently merging with PhotoMedex Inc. (Nasdaq: PHMD). In this case, too, Ben-Haim was charged with trying to dispossess the founders of their shares in the company using fraudulent arguments.
The plaintiff contended, "The company's locks were changed, and the security company's "thugs" were ordered not to let the plaintiffs into the building. Then rumors were started that huge amounts of company funds had disappeared." The case was settled.
With a third company, Impulse Dynamics, Ben-Haim did not go to court, but a number of senior employees quit immediately after an agreement was signed with Guidant for an option to buy the company for $125 million, which ultimately was not exercised.
Sources that were close to the company at the time claim that the managers left since they expected to receive a percentage of the deal, but in practice they only received a few tens of thousands of dollars. "The claims against Ben-Haim are that everywhere he invests, he is the primary beneficiary, and not the entrepreneurs," said an executive in the life sciences industry.
On the other hand, an investor who used to be Ben-Haim's partner, said, "Many people have made a lot of money with Ben-Haim. Impulse Dynamics employees also received tens of thousands of dollars." The CEO of a company that Ben-Haim controls said, "After hearing the rumors, I was sure that Ben-Haim would try to screw me at some point. I anxiously took his money due to lack of choice. In the end, he helped me as much as he could, and was always fair. I prefer working with him than with venture capital funds."
"Shlomo is a black and white person. You are either with him or against him - and then you become an outcast," one entrepreneur said. "He is extremely intelligent, with a lot of nerve (in a good way), who demands a great deal, but also gives you the feeling that he believes that you will succeed. He pushed me to technology levels that I didn't think I could reach, but I reached them. He is an honest person, and he was very generous with me when we went our separate ways. Of course, he was even more generous with himself."
Ben-Haim declined to comment for this article. He never gives interviews. "He loves success and money very much," said another close associate. "He is ambitious. Recognition is very important to him, but he is not looking for media recognition."
Ben-Haim sees only himself
It is hard to overstate Ben-Haim's contribution to the Israeli life sciences industry. He was a founding partner in Biosense Webster, which was sold to Johnson & Johnson (NYSE: JNJ) for $500 million - the biggest exit so far by a private Israeli medical device company. Ben-Haim was apparently the primary inventor of the company's technology, a device used in cardiovascular surgery that enables navigation within the body. Biosense Webster currently has hundreds of millions of dollars in annual sales and has 100 employees in Israel.
After Biosense Webster came a few exits worth almost $1 billion altogether. Ben-Haim was the leading investor and technology manager in each of them.
All of these companies were acquired by medical device industry giants, such as Johnson & Johnson, Medtronic Inc. (NYSE: MDT) and Guidant (now part of Boston Scientific Inc. (NYSE:BSX)). These corporations understood that there were Israeli companies worth acquiring. They were the basis for the blossoming of the Israeli medical device industry since 2000, a field that produced company acquisitions worth billions of dollars.
Ben-Haim was born in Haifa, studied at the Reali High-School, and began taking nuclear physics classes at the Technion Israel Institute of Technology. Later, he also studied medicine at the Technion while simultaneously fulfilling his military service with the IDF. The biography that appears on websites of companies he invests in, states that Ben-Haim is a cardiologist with knowledge of philosophy, nuclear medicine, physics, math, and biomedical engineering. A colleagues says, "He has a few doctorates," but even they do not know exactly what in. Ben-Haim has also taught at the Technion and at Harvard.
During his studies, Ben-Haim met his wife, Simona Ben-Haim, who is Professor and Doctor of Nuclear Medicine at University College London. Simona is a signatory on some of the patents created by companies that her husband invested in, such as imaging company Spectrum Dynamics Ltd., and she is an Impulse Dynamics board member. "Ben-Haim gives her credit for raising their four children while at the same time working as a doctor and as an academician," a family friend said.
Ben-Haim splits his time between London and Caesarea, in a house that he bought for NIS 48 million in early 2011. A friend said, "The house belonged to cardiologist Prof. Danny Gur who is a friend of Ben-Haim's."
Ben-Haim used to be part of a social/business group led by Lewis Pell, which also included brothers Prof. Rafael and Mordechai Beyar. Today, however, Ben-Haim works alone. "He doesn't see anyone except himself," said a life sciences industry investor that attempted to cooperate on a deal with Ben-Haim. "He speaks with everyone, but he doesn't really want to collaborate."
"When companies succeed, Ben-Haim is silent," said another investor in the field. "When he needs money, suddenly he sets up meetings and arrives all excited and tells stories about revolutionary companies and demands amounts that out of this world."
Ben-Haim is currently active mainly in RF Dynamics, as well as companies in the MedInvest Group for which he developed a new financial product.
Ben-Haim also decided that if he does not reach an exit within two years - and he did not - then he would form a medical device investment fund whose investment targets were chosen ahead of time: nine companies, all of which were founded by Ben-Haim and are all in various stages of development after having raised funds from a variety of sources in the past.
MedInvest raised $129 million in bonds in 2008. Ben-Haim himself invested close to one-third of the amount that was raised - $40 million - apparently after a large investor changed his mind at the last minute. The fund tried to create interest among Israeli institutional investors, but in the end MedInvest raised most of the money in Europe. Migdal led the underwriting.
The dream aspect has been added to the bond aspect: investors were to receive bonuses for exits at a rate of 4-10% interest on the bond, which would be set ahead of time. "Issuing bonds in the life sciences industry has already failed, and seven years in life sciences industry companies is not enough," said an investor in public and private companies.
In 2007, Ben-Haim bought a stake of 7% in Prisma Investment House for NIS 85 million, which was founded by Markstone Capital Partners Group LLC, and which was a total failure. There were rumors about personal connections that influenced Ben-Haim to invest in Prisma, but people who know Ben-Haim say, "No one invests that amount of money because of a friend, especially not Ben-Haim."
Ben-Haim befriended Lewis Pell, an American who was originally an investment banker in New York and then got involved in life sciences companies. Pell invested in companies which were then sold, according to him, at a value of $5 billion. Most of Ben-Haim's successes to date are from joint investments made with Pell.
People say that Pell is a much more colorful character than Ben-Haim. In addition to being a businessman in the life sciences industry, Pell is a vintner and a restaurateur. He even persuaded Ben-Haim to be his partner in a winery in Zichron Yaakov. Pell had a restaurant in New York where executives from Johnson & Johnson, Medtronic, and Boston Scientific would eat, and where many exits were decided upon over a bottle of fine wine.
It has been said that when Pell and Ben-Haim met in the early 1990s, Pell recognized Ben-Haim's genius and took him under his wing. Except that in 2005 Pell suddenly changed from the one who opens doors for companies into the one who closes them: the Radiancy IPO in New York was cancelled after the signatories discovered that Pell was convicted in the 1970s for an offense that forbids him from serving as an executive of a publicly traded company. "Shlomo understood that he would be able to get by without Lewis," said an investor who was close to both of them. A financial dispute erupted as a result.
Ben-Haim and Pell did not speak with each other for a few years, but they are now on speaking terms, and Pell is even involved in MedInvest. "The relationship is still charged with emotion," says a person close to them. "It will be very interesting to see what will happen when their joint projects come to and end," said an investor who used to be their partner. It is quite possible that there will be lawsuits, which will tell us a lot about what is going on in their secret kingdom."
Which of Ben-Haim's companies is next in line for an exit? Maybe Impulse Dynamics, which was founded in 1996 and has developed a heart failure treatment device that is implemented into the chest cavity.
Impulse Dynamics CEO Dr. Irit Yaniv says, "Prof. Ben-Haim has discovered that it is possible to stimulate the heart without interrupting its beating in a way that increases the power of the heart muscle's contractions. As a result, after a period of treatment, the heart learns to contract forcefully even without the stimulation."
The product is approved for sales in Europe and carries indemnity insurance in most EU countries. The product already has more than $10 million in sales and the company is profitable.
Impulse Dynamics is currently carrying out clinical trials in the US to obtain US Food and Drug Administration (FDA) approval. At the same time, a trial with 600 patients is currently taking place in Europe to obtain marketing support. Both trials are scheduled to end by the end of 2013 or in early 2014.
Trial results must comply with the European Medical Association guidelines. "Devices that do not are only bought by doctors who love technology. We believe that after clinical trials in Europe have been completed, this change will occur. These patients have no alternative solution."
Impulse Dynamics is gearing up for another round of funding soon. "The company has been utilizing funds raised from Guidant for the last ten years," Yaniv said. "We have subsequently received $50 million from MedInvest, but we will need to have another round so that we can complete the FDA approval process in the US."
MetaCure also deals with electrical muscle stimulation - in the stomach - to manage diabetes. "Stimulating the stomach makes the muscle contract, which sends a message to the brain that enhances satiety, and as a result neurons stimulate hormone secretion," says Yaniv, who is also CEO of the company.
The product is approved for marketing, but the company is trying to receive approval for a smaller version, which would be able to be inserted into the stomach non-invasively. Yaniv believes that the product will be available within two to three years.
Will diabetes patients be willing to switch from injections to an implanted device?
"The product has the benefit that after it is implanted, the patient no longer needs to think about medications at all. The product is also safer, since the hormones are secreted directly into the brain. We are not marketing the product to patients who only need one injection a day. It is intended for patients who take many pills and need multiple daily injections." Yaniv says that Metacure does not currently need additional funding. It is currently using funding from a EU Seventh Framework Progamme for Research and Development.
List of Ben-Haim's exits:
- Biosense Webster: acquired in 1997 for $500,000,000 by J&J
- Disc-O-Tech: acquired in 2006 for $220,000,000 by Kyphon
- Instent: acquired in 1996 for $200,000,000 by Medtronic
- Radiancy: acquired in 2011 for $174,000,000 by PhotoMedex
- Impulse Dynamics: acquired in 2000 for $127,000,000 by Guidant
- X-Technologies: acquired in 2003 for $60,000,000 by Guidant
Total exits: $1.33 billion
Published by Globes [online], Israel business news - www.globes-online.com - on October 31, 2011
© Copyright of Globes Publisher Itonut (1983) Ltd. 2011
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