Biopharmaceuticals is the most significant sector of the Israeli biotechnology market. Israel’s biotechnology is particularly strong in bio-therapeutics and dominant in areas of neurological disorders, cancer and autoimmune syndromes. About half of all university research projects in therapeutics and most of the biotech drugs in the pipeline, are in these areas. Recently Israel has become a global leader in the promising new therapeutic area of regenerative medicine and cell therapy.

There are 900 senior faculty members in biotech related departments and one third of all PhD graduates come from biotech related programs. Israel has the largest number of scientists per capita in the world and devotes 35% of its research activities to life sciences.

Israel has a successful and well developed pharmaceutical industry. The focus of this industry is on the manufacturing and distribution of generic drugs. The industry is growing at a rate of 10% annually. Imports account for approximately 50-70% of the total market in terms of sales.

Israel ranks fourth in bio-pharma patents per capita worldwide and is number one in medical device patents per capita. Currently more than thirteen drugs are in advanced stages of developments (phases II, III) putting Israel in the eight position in Europe. Israel is one of the 34 countries and the only non-European nation taking part in the EU Framework Program (FP7) operating from 2007-2013.

Biotechnology in Israel is booming. As one of its priority sectors under the Government of Israel’s innovation strategy, the government has increased its financial support for this industry and recently committed $US 300 million to biotech over the next three years to ensure that the industry continues to be a leading source of innovation for Israel. In the last year more than a dozen biotech start-ups have gone public on the Tel Aviv Stock Exchange (TASE). The biggest IPO, with a valuation of about $US 250 million is to take place in the near future. In February 2007, drug developer Bioline RX, backed by Teva Pharmaceuticals (which had acquired Novopharm in Canada in 2000), Pitango and Giza Venture Capital raised US$50 million.

The number of Israeli companies in the life sciences sector has risen to more than 800, while demand for employees has risen to 20%.

Israel’s high tech success in general and the biomedical success in particular both in the academia and the business marketplace is a result of a highly diverse population (7.15 million) resulting from years of immigration, providing researchers with a heterogeneous population for clinical trial research.

Lower costs for conducting clinical trials and a history of brining new products to an advanced stage of development more rapidly than anywhere else in the world are key factors that make Israel an attractive place for foreign companies to conduct clinical trial or establish research partnerships.

Recent years have seen promising developments in terms of mobilizing capital. Israel’s life science sector raised US$369 million from venture capital funds in 2006 compared to US$284 million in 2005. Foreign corporations continue to invest directly in Israel (e.g. Johnson &Johnson acquired ColBar Life Science for US$159 million.

Israeli companies have also held successful public offerings on the Tel Aviv Stock Exchange. Over 20 companies traded on the TASE have a combined market value of nearly US$ 400 million and Clal Biotechnology is planning an IPO in Tel Aviv at a market value of more than US$60 million. The TASE will soon start publishing a biotech index and the sale of index certificates will further boost investment in biotech. Teva has led the way in this regard. During 2006, sales of Teva’s Copaxone reached US$1.4 billion with sales of the treatment for Multiple Sclerosis expected to climb to at least US$1.5 billion in 2007.

With more major global healthcare and pharmaceutical corporations arriving to Israel, Israeli government commitment to life sciences and the increase in VC investments and public offerings, create an inviting and experienced setting for the biomedical sector in Israel.

2. Market And Sector Challenges (Strengths And Weaknesses)

Biotechnology (and the life sciences industry in general) has become a top a priority for the Office of the Chief Scientist (OCS) at the Ministry of Industry Trade and Labour. It was declared a ?preferred? sector in 2005. The declaration translates in increased cooperation between academia and industry, dedicated technology incubators, start-up ventures, industrial R&D support and international cooperation.

The first incubator dedicated to biotechnology was established in 2005. A tender for establishing a second one, is underway. In 2005, the Israeli Life Science Industry Organization (ILSI) was established to serve the needs of the diverse life science cluster in Israel. Its mission is to research, develop, advocate policies, and increase awareness of the industry’s strength and innovation worldwide.

The Government of Israel is exploring the possibility to implement a new R&D cooperation initiative which will include leading global companies together with Israeli companies with an emphasis on bio- pharma companies. Under this initiative, approved projects will be entitled to financial assistance from the Government.

There are good opportunities in this market for Canadian companies interested in R&D partnerships and technology transfer agreements to take advantage of Israel’s research strengths. Areas where major advances in biotechnology have been made include the use of molecular modeling to design new and improved drugs, synthetic polyamine acids for drug development, drug delivery techniques and drug design by peptide modification.

Israel needs to invest further in the essential infrastructure to compete in the post-genomic era, especially in basic research infrastructure and early stage commercialization. Currently, Israeli biotechnology firms tend to sell their early stage technology to international investors or multinational concerns, rather than take the risk to develop the product further. There is scope for combining Canadian and Israeli talents where Canadian biotechnology companies can form strategic partnerships with Israeli companies, both at the pre- and post-commercialization stages.

Due to insufficient industrial infrastructure facilities for drug development and testing, there are market opportunities for Canadian companies to provide these services. Canadian companies can also work in cooperation with Israeli companies to conduct clinical trials in Israel where there is a high level of medical expertise, lower costs and a diverse population base.

Israel is expected to become a major centre for the development of pharmaceuticals, especially generic brands. However, in spite of recent growth, the Israeli pharmaceutical market remains relatively small and the Israeli biotechnology industry has yet to achieve the level of the development of its international competitors, particularly in the United States, Canada, Germany and the United Kingdom.

In 1998, Israel reformed its drug import regulations to include major changes in pricing, importing and approvals for new drugs. For example, medications approved by the U.S. Food and Drug Administration (FDA) or the European Medical Regulations Agency will be approved by the Ministry of Health in Israel much more quickly than those that have not received such approval.

The FDA and the Israel Ministry of Health have signed a Mutual Recognition Agreement (MRA) to enable full acceptance and recognition by the FDA of clinical trials conducted in Israel for new drugs and medical devices.

Despite objections from international biopharmaceutical companies, Israel has allowed parallel drug imports since September 2000.

The Canada-Israel Industrial Research Development Foundation (CIIRDF) provides companies in either country with an introductory service for the purpose of creating R&D alliances. The program contributes half of the costs of joint R&D projects (up to CAD$50,000 over one year for approved pilot projects and up to CAD$750,000 over three years to fund approved full-scale projects) for eligible Canadian or Israeli firms operating and headquartered in either Canada or Israel. At least 30% of the cash cost of any individual project must be spent in either Canada or Israel; contributions are repayable from commercial revenues from the project. For further information, Canadian companies should contact CIIRDF.

Canadian companies interested in research and development relationships with Israeli companies are encouraged to consult the MATIMOP program. MATIMOP (Israeli Industry Center for Research and Development) is a public non-profit organization that promotes joint industrial development of advanced technologies. The program’s web site (http://www2.matimop.org.il) contains a database outlining co-operative program opportunities that span a range of advanced technologies.

Biomed Israel 2008, http://www.kenes.com/biomed/, Israel’s international life science and technology conference & the 2nd International Stem Cell meeting will take place in May 27-29, 2008.

3. Sub-Sector Identification

Within the larger framework of the life science industry in Israel, medical devices account for 53% of the companies in this sector, biotechnology with 22%, pharmaceutical with 12%, followed by ag-biotech.

Domestic biotechnology companies focus mainly on product development for cancer, auto-immune syndromes, and neurology disorders and to a lesser extent, on cosmetics, agriculture and environmental products.

Approximately 35% of the life sciences industry, i.e., approximately 260 companies, are at the seed stage. A larger number of these companies are involved in the treatment of cardiovascular and peripheral vascular disease (73 companies), oncology (41), neurodegenerative disease (32), and other age related diseases such as ophthalmic (16) and orthopaedic (18).

Israel has always been at the forefront of stem cell research. In 1998 Professor Joseph Itskovitz ?Eldor  from the Technion Institute of Technology in Haifa and a US professor were the first to produce stem cells from human embryos. The Israeli government provides financial support to research in this field. A key example is the Genesis Consortium which develops generic technologies for cell therapy and stem cell derived products. Its members include Israel’s leading universities and companies.

Biomedical technologies are increasingly becoming linked to other emerging domains such as nano-tech, leading edge electronics and sensors. This emerging convergence presents great opportunities for Israel, specifically the tight link of nanotechnology and biotechnology. Among the immediate deliverables are improved targeted drug therapies, tissue regeneration and tissue engineering solutions, minimally invasive procedures and novel diagnostic tools.

Excerpts from Biopharmaceuticals Sector  Profile - Israe. November 2007, Canadian Trade Commissioner Servicel