"Bringing money to a company is the most important component, even more so than its products, and it is in this field especially that Israelis have some learning to do," claims Stephen Sammut, chairman and CEO of the International Institute for Biotechnology Entrepreneurship (IIBE), and partner in Burrill & Co. a leading US biomed investment and consulting company. Sammut, who is also Senior Fellow in Health Care Systems and Entrepreneurship at the Wharton School, Pennsylvania University, aimed to get this message across to local biotech managers during a special course scheduled last week on health care technological innovation at Tel Aviv University.
One of the areas where Sammut feels Israeli are weak is "doing homework" before approaching financing institutions. "Venture capital funds worldwide which specialize in life sciences each have their own unique vision, and operate according to a very specific strategy. I feel business development managers in Israel are not doing enough preliminary research and do not adapt their pitch to the business model that would be the most logical for the fund they've approached. Some of them don't even adapt their pitch specifically tos funds, as opposed to one they would make to a big or mid-size pharmaceutical company. Any institution like this wants to hear other things from the company."
Holes in the portfolio
Sammut is nonetheless highly complementary about the Israeli industry - but we're used to hearing compliments and somewhat lesss accustomed to criticism as overt as this. "There are thousands of start-ups, but the big pharmaceutical companies will make perhaps 12 deals a year, and the funds will invest in, perhaps, 10 companies out of the hundreds of applications they receive individually," he says. "So you've got to make sure that you fit exactly to the opportunities the institution you've approached has already identified. The company has to be familiar with every product in a candidate company's pipeline, and where the holes are in its portfolio. When approaching a pharmaceutical company make sure you can prove that you can help it earn at least half a billion dollars." And what if you're not targeting a market like this? You'll have no choice but to build yourselves as an independent company.
What else are investors looking for? "They look very closely at the strength of the intellectual property," Sammut says. "Today everyone is patenting everything, so having a patent is not enough. You also need to know how much it covers, and what the others have. A company can have several strong patents covering the core of its technology, but still have to pay royalties for ten other patents without which it can't move. This burdens the company with costs and makes the deal less worthwhile.
"Serious investors won't enter a deal until they ascertain that there's absolute freedom to operate from the point of view of intellectual property, and you should prepare for this in advance." Sammut adds than not all Israelis invest sufficient effort in building a proper health coverage reimbursement program. "It's not something you can outsource," he insists.
Once the partnership is in place, the biggest mistake is to avoid managing it. "Pharmaceutical companies have people whose job it is to manage partnerships, but sometimes they don't manage the specific partnership with you with the necessary expertise or professionalism," says Sammut.
"It's important to be involved at the highest levels. You have to build the management plan together, make sure you know how big the budget actually is, consult each other on appointments of project leaders, insist on reciprocal reporting, and monitor events," Sammut concludes.
The course "Healthcare Technological Innovation - From Idea to Commercialization" was jointly organized by Tamir Fishman Venture Capital (TASE: TFVC) managing partner Dr. Benny Zeevi on behalf of the Israel Life Science Industry Organization; Professor Simon Beninga, outgoing Dean of the Faculty of Management and visiting Professor of Finance at Wharton School, University of Pennsylvania; and Dr. Robert Goldberg, Vice President of the Center for Medicine in the Public Interest.
The course in Israel amounted to an upgrade compared with other courses of this kind elsewhere in the sense that participants had to do more homework, and also share their experiences at work, by allowing others to analyze events at their companies or review their business plans.
Published by Globes [online], Israel business news - www.globes.co.il - on November 18, 2007
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