Close collaboration between Germany's Merck Serono SA and Israel's life sciences industry is deepening. Earlier this week, Merck Serono inaugurated its new drug development incubator at Inter-Lab Incubator in Yavne. Merck Serono invested €10 million in the project, an amount that nears the investment by the government incubators program in drug development companies. Inter-Lab has already picked three projects from the 130 applicants, and the incubator will probably have five or six projects altogether.
Merck Serono will fully finance some of the companies, and will finance others together with partners, such as venture capital funds. Inter-Lab Incubator general manager Simone Botti previously served as VP business development at Rad BioMed Incubator Ltd.
To mark the inauguration, Merck KGaA chairman Dr. Karl-Ludwig Kley came to Israel. In the past few years, he has become one of the most enthusiastic supporters of Israel's pharmaceutical industry in the world.
He has no Israeli or Jewish roots, but upon taking up his post, he discovered that Merck's collaboration with Israeli companies had been important to the company over the years. These include Serono's multiple sclerosis drug Rebif, which was jointly developed with the Weizmann Institute of Science; fertility drug Gonal F, discovered at Tel Hashomer Medical Center; and chemotherapy drug Erbitux, which the Weizmann Institute shared in the discovery and which Merck Serono markets.
Kley was impressed by Israel's capabilities and encourages collaborations. These include a cooperation agreement through the Ministry of Industry, Trade and Labor, ties with four universities, the Inter-Lab R&D Center, and now the Inter-Lab incubator.
"The Israeli incubator is the first in the world for Merck," Kley told "Globes" in an interview. "It's important to stress that the incubator is not at the expense of other collaborations that Merck has in the field - acquisitions of companies, acquisitions of stakes in companies via our venture capital fund, and activities with universities."
Inter-Lab general manager Regine Shevach adds, "We bring to the incubator companies experienced in drug discovery and development. After two to three years, we'll either acquire them in full, or if they are interesting but not suitable for our portfolio, we can release them to operate independently or collaborate with other companies. We always try to keep freedom of action."
Kley says that Merck Serono is most interested in oncology, fertility, multiple sclerosis, and endocrinology, but adds, "The incubator is intended for seed-stage investments, and it will not invest in companies with just one product or molecule, but in companies with a technology platform suited for future developments for a range of diseases. Unless there is a company with a single really amazing product."
No dramatic changes in the industry
Shevach says, "We now know that, without the combination of advanced calculation methods in pharmaceuticals, it will be hard to make progress. This will therefore be one of the incubator's focuses."
"Globes": How does the incubator fit in with Merck's general strategy for innovation during such a stormy time in the pharmaceutical industry?
Kley: "When I joined the industry in the 1980s, I was told that there was a patent cliff and few blockbuster drugs. Every generation in every industry thinks that it is at the most critical moment in that industry. In my view, the changes are not so dramatic. Everything could have been predicted in the 1970s: government pressure on drug prices; the expiration of patents. So it's true that there are no $4 billion drugs, but there are $500 million drugs, and it's possible to do business with them, too. True, it's necessary to show governments that there is economic value in a product. Fine, we'll change our tests structure to show this as well."
Have the companies that have seen the writing on the wall really succeeded in changing in time?
"It's always hard to fix the roof when it's sunny. It's very human to try and postpone the change."
So the big change in the business model is still ahead, as most consultants reviewing the industry claim?
"The time has come to lower the hype on this point. There are dramatic changes in the world. The patent cliff isn't one of them. The patent cliff is a snapshot of a company's situation. So long as there are patents, there will always be a patent cliff, but there are still a lot of new diseases, as well as old diseases that are making a comeback. There's a great need for innovation and humanity has a capacity to innovate. I am a strong believer in it."
One of your products that most interests the Israeli market is Rebif, a competitor of Teva's Copaxone.
"Only in Israel am I asked these questions. The patent for the current version of Rebif on the market only expires in 2022. I have no interest whatsoever in the expiration of Copaxone's patent, because interferons, in which Rebif is the market leader, have their own place in the treatment process of multiple sclerosis. Our sales rose by 1% last year."
The multiple sclerosis market will be much more competitive
"It is not now possible to predict what will happen in the multiple sclerosis market in 5-10 years. That strongly depends on which drugs now in clinical trials will succeed in reaching the market. All we know is that the field will be much more competitive."
At the Inter-Lab Incubator inauguration, Kley said, "I regret not visiting Israel as a young man or student, and that I have not utilized all that this country has to offer. We're not the ones who will come and land here with a $300 million check for one company. We're building our presence in Israel gradually, in a diversified way, step by step, and that is what makes us special."
Published by Globes [online], Israel business news - www.globes-online.com - on April 18, 2012
© Copyright of Globes Publisher Itonut (1983) Ltd. 2012 BoI, Treasury settle bank controlling core liquidation The banking sector believes Discount Bank's controlling shareholders - the Bronfman family and Rubin Schron - will exploit the new regulations. Eran Peer The Bank of Israel and the Ministry of Finance have laid the regulatory groundwork for the decentralization of a bank's controlling core, i.e. a situation in which a bank's controlling shareholder wants to sell its stake, but not to a successor controlling shareholder, with the result that the bank will not have a controlling core.
The banking sector believes Israel Discount Bank's (TASE: DSCT) controlling shareholders - the Bronfman family and Rubin Schron - will exploit the new regulations, as they have wanted to sell their stakes for a long time.
Other bank controlling shareholders who may be required to sell their shares under the new regulations are First International Bank of Israel (TASE: FTIN) controlling shareholder Zadik Bino and Mizrahi Tefahot Bank (TASE:MZTF) controlling shareholder Leora Ofer. They may choose to do so, in order to meet with the recommendations of the Committee on Concentration in the Economy, which bans control of both substantial financial and non-financial companies.
Supervisor of Banks David Zaken and Supervisor of Capital Markets, Insurance and Savings Prof. Oded Sarig also published a joint document setting out seven guiding principles for the criteria and general terms for controlling shareholders and applicants for a control permit at a bank, insurance company, or financial institution. They are as follows:
- The minimum holding for control of a supervised company as a function of the size of the bank or insurance company.
- Capping the difference between the equity interest of the controlling shareholder in a supervised company and the controlling stake in it.
- Rules and restrictions on corporations through which a controlling shareholder may hold a supervised company, in order to ensure stability in the chain of control.
- The shareholders' equity threshold for an applicant for a control permit, as a function of the size of the investment in a supervised company.
- Restrictions on how the investment to acquire a bank or insurance company is financed.
- A commitment by the members of the controlling core to inject capital into the supervised company they control, under terms and in amounts to be set by the relevant regulator.
Published by Globes [online], Israel business news - www.globes-online.com - on April 18, 2012
© Copyright of Globes Publisher Itonut (1983) Ltd. 2012