BDO Ziv Haft predicts that, in 2011, for the first time, deals in Israel's life sciences industry will exceed deals in IT. An examination of investment and exits in January-February 2011 found that 50% of the deals were in life sciences companies, continuing the trend of 2009-10. BDO Ziv Haft believes that the trend will continue.
Since the establishment of Israel's high-tech industry, IT has drawn the lion's share of investors' attention and money. Most capital flowed to software, telecommunications equipment, and semiconductor companies. This year, however, the biomed industry is expected to see a lot of action, although not as a proportion of total capital.
BDO Ziv Haft partner and high-tech cluster manager Yaniv Cohen said that the main reason for the life sciences resurgence is that investors are seeking small deals, not investments of tens of millions of dollars. "Investors see biomed's potential, especially in early-stage companies, where small investments are possible, and where the potential for a higher return is greater," he says, adding that investment in the life sciences are also suitable for Israeli investors.
The survey was held ahead of BDO Ziv Haft and Luzzatto & Luzzatto patent attorney and Yigal Arnon & Co. law firm's 5th Annual High-Tech Conference on Wednesday.
The breakdown of deals by BDO Ziv Haft found that, in contrast to IT where most deals are fundraising from venture capital funds or the sale of companies to large corporations, most deals in the life sciences were IPOs, especially on the Tel Aviv Stock Exchange (TASE).
Another key difference, is that while most fundraising and exits by IT companies take place when the companies have sales, deals in the life sciences are divided almost equally between companies with initial sales and companies still in the R&D stage.
Investors in IT companies seek growing companies with large revenue, whereas investors in biomed companies emphasize companies' potential and innovation, even if they are not reflected in current sales.
A final difference is that publicly traded biomed companies tend to be small, with fewer than 20 employees, whereas public traded IT companies tend to be much larger.
Published by Globes [online], Israel business news - www.globes-online.com - on March 13, 2011
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