Ever since the time I served as IDB chairman and CEO, I have believed that Israel has tremendous potential in the biotechnology field. This was what led me in 1998 to initiate the founding of Clal Biotechnology Industries Ltd. - the only company in Israel that was established with the aim of investing exclusively in biotechnology.
After IDB was sold, I continued to believe in Israel's biotechnology industry and I invested in it through the investment company I founded, GlenRock Israel. But as my faith in both the field itself and its vast potential in Israel deepened, I found myself with an increasing sense that at the national level, biotechnology is one of the country's missed opportunities. It is my feeling that if the government does not take systematic action to remedy this, it will forfeit a golden opportunity to develop a new industry, of great value to Israel's economic growth.
At a time when many countries worldwide have made biotech a national priority in Israel this industry is "stuck." While the global biotech industry is growing at an annual rate of 20%, reaching $50 billion in 2006 and expected to grow to $150 billion by 2010, the figures in Israel are disappointing. Save for Teva's Copaxone, and three other drugs, all developed on the basis of Israeli science by foreign companies (Doxil, Exelon and Rebif), which pay royalties to Israeli universities, the biotechnology industry's aggregate turnover does not exceed $100 million a year.
The key problem is that Israel's biotech industry is "stuck" at the preclinical stage. 160 of the industry's companies are at the preclinical stage and are a long way from commercialization. A further seven Israeli biotech companies are traded on Nasdaq at a combined value of just $1.6 billion.
For the sake of comparison, a US biotechnology company will raise in excess of $10 million on average in the first three years of its existence. A UK company will raise $4 million, while an Israeli company will raise $1-1.5 million. I am happy to note that over the last two years the capital market has helped raise capital for biotech companies. That said, this appears to be an ephemeral measure, which over time will be of help to mature companies only.
There is a long list of reasons why the biotechnology industry is so crucial to the Israeli economy. First, it enables us to utilize Israel's sole natural resource - quality manpower and higher education graduates - and thereby prevent a brain drain. Second, a thriving biotechnology industry is important as a alternative to the fast disappearing low technology industries (which are being moved to the East), and as an extra source of power for the high-tech industry, which has reached maturity and which is under threat from technology centers in China, India, and other countries. Moreover, it will act as a receptor for the inflow of capital and international companies to Israel, and create jobs not just in biotech companies but also in supporting industries (especially in outlying regions). It will also create a platform for the promotion of scientific education and excellence in science.
To put Israel's biotech industry on the right track, I support the creation of a national investment fund totaling $300-500 million for five years, which together with a matching sum from the private sector, will finance companies at all stages of development, from incubator to growth and mature companies (as was done during the 1990s in the technology sector). It should be remembered that most of this sum will return directly as a contribution to GDP through salaries and taxes.
Parallel to this, Israel should aim to bring two or three leading biopharmaceutical companies. There must also be investment in human capital and the building of a pool of skilled management, as well as supporting physical infrastructures for the biotech industry.
The writer is chairman and CEO of Glenrock Israel.
Published by Globes [online], Israel business news - www.globes.co.il - on July 3, 2007
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