Clal Biotechnology Industries Ltd. (TASE: CBI), the life sciences arm of Nochi Dankner's IDB Holding Corp. Ltd. (TASE:IDBH), plans to set up a NIS 250 million fund for medical devices companies. The company is seeking a partner from among Israeli institutional investors. The likeliest partners are sister company Clal Insurance Enterprises Holdings Ltd. (TASE: CLIS) and Migdal Insurance and Financial Holdings Ltd. (TASE: MGDL), with which Clal Biotech has collaborated with in the past.
The fund will presumably be set up under the aegis of Clal Biotech, which will provide part of the fund's capital. Clal Biotech's cash and cash equivalents totaled NIS 165 million at the end of 2010. Clal Biotech's management subsidiary Arte Venture Group will serve as the fund's management company.
Teva Pharmaceutical Industries Ltd. (Nasdaq: TEVA; TASE: TEVA), which owns 14.6% of Clal Biotech, has no medical devices operations, and it will probably not participate in the new fund, except indirectly through its holding in Clal Biotech. IDB, which owns 58.6% of Clal Biotech, has medical devices operations through its high-tech investment arm, Elron Electronic Industries Ltd. (Pink Sheets: ELRNF; TASE: ELRN).
For Clal Biotech, which has already utilized most of its agreements with Teva, the fund will be an opportunity to show that it can operate independently in a sector without a strong shareholder as a partner.
In contrast to Israel's drug development industry, which is now receiving government support through the biomed funds, the medical devices industry, once a major investment target for venture capital and which had some outstanding exits, currently suffers from a lack of resources. The shortage is partly due to the global credit crunch, which caused funds to cut investments, and because of tighter regulatory requirements for medical devices, resulting in longer time to market and heavier investments before an exit.
If Clal Biotech enters the medical devices industry, it will likely target companies that have already raised large amounts of capital and have reached the late stages of product development, but whose cash reserves are dwindling. This is Clal Biotech's modus operandi in the drug development field, reflected in its investments in Andromeda Biotech Ltd. and Biomedics Investments Ltd.
Clal Biotech's share price rose 0.7% in morning trading to NIS 22.08, giving a market cap of NIS 2.17 billion.
Published by Globes [online], Israel business news - www.globes-online.com - on April 13, 2011
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