The Israeli life science juggernaut

14 Nov The Israeli life science juggernaut

Last week, I traveled to Israel as part of an Illinois trade mission to promote Illinois as a point of entry into the U.S. market to Israeli companies. I was one of two persons representing the Life Science sector among multiple sectors of Illinois business present.
I was particularly interested in experiencing firsthand the Israeli Life Science juggernaut after writing about it earlier this year. During my stay in Israel, I met with many of the leading elements of the Israeli Life Science Industry.
According to Ernst & Young’s annual report on the world biotech situation, Israel had 162 biotech companies of which 160 were privately held and 2 were publicly-traded. This compares with 346 companies in Germany (12 publicly-traded), 311 companies in the U.K. (43 publicly-traded), 228 in France (6 publicly-traded), and 178 companies in Sweden (9 publicly-traded). All of this from a country smaller than the state of New Jersey.
The number of companies, in reality, is much higher as it does not take into account the vast number of Israeli medical device companies, which is more numerous than the number of biotech companies.
Considering that Israel is a country with less than 7 million inhabitants, it had a GDP of $117, 548, which would rank it about 40^th in the world. To contrast this with Chicago, if Chicago were a country it would have the 18^th largest GDP in the world, worth over $330 billion.
Israel experienced high levels of immigration in the early 1990’s with annual levels achieving over 150,000 persons per year. This rate has slowed down considerably with current immigration levels running at about 20,000+ per year. Nevertheless, in five years the country has gone from a population of 6.1 million in 1999 to 6.8 million in 2004.
R&D is embedded heavily in Israeli society and business and is reflected by the highest level of most industrialized countries at five percent of GDP versus 2.8 percent in the U.S., 2.5 percent in Germany, 3.1 percent in Japan, 1.9 percent in the U.K., and 4.6 percent in Sweden.
Some interesting data pops out courtesy of Evergreen Venture Partners:
If Israel were a U.S. state, it would rank as the third largest for venture capital, having raised $1.5 billion in 2004 versus $9.6 billion in California, $2.4 billion in Massachusetts, and $1.1 billion in Texas. Compare this VC investment to Europe, with $1.0 billion in the U.K., $.7 billion in France and a similar amount in Germany.
About 45% of this VC investment is from Israeli VC’s while the remaining portion is from foreign VC’s. In other words, Israel is the largest VC market outside of the U.S. Now, granted that not all of the above is life science, it is still estimated that there are about 500 Israeli life science companies today. In fact, according to the Israel Life Sciences Industry (www.ilsi.org.il), there are 725 registered companies in their database of which 554 are life science companies (52% of these were founded in the last 5 years) and 171 are industry-related companies. Of these companies, 41% are actually generating revenue. Additionally, the Israeli Life Science industry employs more than 25,000 people.
In terms of areas of research, the Israeli life science companies are covering the following fields:
• 67 companies in the cardiovascular and peripheral vascular fields
• 35 are in oncology
• 25 are in the neurodegenerative field
• 54% of the companies are in the medical device field with 21% in biotechnology and 13% in pharmaceuticals; 4% are in agbiotech
It is clear that most Israeli Life Science companies think about setting up shop in the U.S on the East or West Coasts. But, as the great preponderance of medical device companies (including cardiovascular, orthopedic, surgical and diagnostic products) are here in the Midwest, it is critical to educate these companies on this fact. While this trade mission was successful in garnering interest, it will need to be followed up further visits and creation of ties to the life science trade association, VC’s and key companies.
An interesting part of the trade mission was a visit to a city called Petach Tikvah, which is Chicago’s sister city. This city is about 45 minutes outside of Tel Aviv and hosts a population of about 200,000. I was surprised to learn that IBM had established a special technology world business unit here composed of 45 people to keep their eyes and ears open to Israeli technology (software/hardware) that could be used on a world-scale. IBM has one of the world’s largest life science consulting practices and this group was also present in Israel.
IBM’s local strategy made me ask Israelis in the Life Science community about awareness of other Chicago-based life science companies’ presence in Israel. While certainly there was an awareness of Abbott, Baxter, Dade-Behring, a little awareness of Hospira, only Baxter’s name was mentioned repeatedly as a company that had sourced a lot of new medical device technology from Israel. Around the Midwest, the names of Zimmer, Stryker, and Medtronic were well-known to the Israeli life science community.
All in all, it was quite an eye-opening trip, and I look forward to continued planning with the American-Israeli Chamber of Commerce here in Chicago and the Illinois Trade Office (part of the Illinois Department of Commerce and Economic Opportunity) and to see how we can capitalize on some of the momentum gained with this trip.