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Page 1: Sustaining Innovation in Israel: Policy and Finance for Global ... · 2004 - Nobel Prize for Chemistry to Aaron Ciechanover, Avram Hershko 2009 - Nobel Prize for Chemistry to Ada

Sustaining Innovation in Israel: Policy and Finance for Global Competitiveness

Wednesday, May 4, 2011 4:00 PM - 5:15 PM

Page 2: Sustaining Innovation in Israel: Policy and Finance for Global ... · 2004 - Nobel Prize for Chemistry to Aaron Ciechanover, Avram Hershko 2009 - Nobel Prize for Chemistry to Ada

Anat Naschitz Managing Director

OrbiMed Israel

Innovative financing for Israeli lifesciences

Page 3: Sustaining Innovation in Israel: Policy and Finance for Global ... · 2004 - Nobel Prize for Chemistry to Aaron Ciechanover, Avram Hershko 2009 - Nobel Prize for Chemistry to Ada

© 2011 OrbiMed Advisors, LLC. All Rights Reserved. CONFIDENTIAL

OrbiMed – global HC investment firm

Page 4: Sustaining Innovation in Israel: Policy and Finance for Global ... · 2004 - Nobel Prize for Chemistry to Aaron Ciechanover, Avram Hershko 2009 - Nobel Prize for Chemistry to Ada

OrbiMed Israel

Israeli lifescience

Page 5: Sustaining Innovation in Israel: Policy and Finance for Global ... · 2004 - Nobel Prize for Chemistry to Aaron Ciechanover, Avram Hershko 2009 - Nobel Prize for Chemistry to Ada

$bn

Medical device exits

Biopharma exits

Total exits

Biopharma Licensing

Total value

Excluding value creation in large corporates, e.g., Teva Source: Press for each deal; IMS

Cumulative exit valuations 1995-2010 Cumulative revenues 2003-2009

© 2011 OrbiMed Advisors, LLC. All Rights Reserved. CONFIDENTIAL

Israeli life sciences: >$30bn in value created

Page 6: Sustaining Innovation in Israel: Policy and Finance for Global ... · 2004 - Nobel Prize for Chemistry to Aaron Ciechanover, Avram Hershko 2009 - Nobel Prize for Chemistry to Ada

>100 exits over the past 15 years

Page 7: Sustaining Innovation in Israel: Policy and Finance for Global ... · 2004 - Nobel Prize for Chemistry to Aaron Ciechanover, Avram Hershko 2009 - Nobel Prize for Chemistry to Ada

History Of Commercial Success

Rebif Serono, MS

Copaxone Teva, MS

Doxil* J&J, cancer

Exelon Novartis, Alzheimer’s

Erbitux Imclone, cancer

Azilect Teva, Parkinson’s

Total

WW 2009 sales of drugs with significant IP from Israel, $bn

$8.1bn achieved Pre-VC participation

* Doxil numbers from 2007. Source: IMS © 2011 OrbiMed Advisors, LLC. All Rights Reserved. CONFIDENTIAL

Page 8: Sustaining Innovation in Israel: Policy and Finance for Global ... · 2004 - Nobel Prize for Chemistry to Aaron Ciechanover, Avram Hershko 2009 - Nobel Prize for Chemistry to Ada

Good early stage infrastructure Supporting creation of 50-70 new companies p.a.

Page 9: Sustaining Innovation in Israel: Policy and Finance for Global ... · 2004 - Nobel Prize for Chemistry to Aaron Ciechanover, Avram Hershko 2009 - Nobel Prize for Chemistry to Ada

Total* Revenues P III P II

Growing cohort of later stage biopharma

Pre- clinical

Increasing number of companies to choose from

>80 in clinical trials, dramatic increase over the last 3-4 years

Mostly generics, formulation, diagnostics, process

* This is only a subset. ILSI lists 293 pharma and biotech companies, including some companies less relevant for our purposes Source: ILSI, OrbiMed analysis

© 2011 OrbiMed Advisors, LLC. All Rights Reserved. CONFIDENTIAL

Page 10: Sustaining Innovation in Israel: Policy and Finance for Global ... · 2004 - Nobel Prize for Chemistry to Aaron Ciechanover, Avram Hershko 2009 - Nobel Prize for Chemistry to Ada

1,000 companies

thriving industry

~$70m p.a. available locally

VCs contract globally

Funding gap, no global infrastructure

Page 11: Sustaining Innovation in Israel: Policy and Finance for Global ... · 2004 - Nobel Prize for Chemistry to Aaron Ciechanover, Avram Hershko 2009 - Nobel Prize for Chemistry to Ada

Funding sources shrinking

Number of funds raised, US Median fund size, US, $m

$bn funds raised, Israel

Source: VentureSource, IVC (2010 Expected) © 2011 OrbiMed Advisors, LLC. All Rights Reserved. CONFIDENTIAL

Across sectors (not just lifescience)

Page 12: Sustaining Innovation in Israel: Policy and Finance for Global ... · 2004 - Nobel Prize for Chemistry to Aaron Ciechanover, Avram Hershko 2009 - Nobel Prize for Chemistry to Ada

Government intervention

Page 13: Sustaining Innovation in Israel: Policy and Finance for Global ... · 2004 - Nobel Prize for Chemistry to Aaron Ciechanover, Avram Hershko 2009 - Nobel Prize for Chemistry to Ada

Invested

Got

What’s in it for the government: leverage

Page 14: Sustaining Innovation in Israel: Policy and Finance for Global ... · 2004 - Nobel Prize for Chemistry to Aaron Ciechanover, Avram Hershko 2009 - Nobel Prize for Chemistry to Ada

government anchor

Preferred returns, 1st in distributions

Government gives away 80% of its returns

Set management fee

Favorable terms for LPs

Page 15: Sustaining Innovation in Israel: Policy and Finance for Global ... · 2004 - Nobel Prize for Chemistry to Aaron Ciechanover, Avram Hershko 2009 - Nobel Prize for Chemistry to Ada

Government benefit – example

Assumes fund size maximizes government benefit (4:1 ratio amount invested by LPs:government)

Page 16: Sustaining Innovation in Israel: Policy and Finance for Global ... · 2004 - Nobel Prize for Chemistry to Aaron Ciechanover, Avram Hershko 2009 - Nobel Prize for Chemistry to Ada

Prolific underlying industry Funding gap -> cheap Clever structure Open mind

Ingredients for success

Page 17: Sustaining Innovation in Israel: Policy and Finance for Global ... · 2004 - Nobel Prize for Chemistry to Aaron Ciechanover, Avram Hershko 2009 - Nobel Prize for Chemistry to Ada

Innovative financing for Israeli lifesciences

Anat Naschitz [email protected]

+972 (54) 7711788

Page 18: Sustaining Innovation in Israel: Policy and Finance for Global ... · 2004 - Nobel Prize for Chemistry to Aaron Ciechanover, Avram Hershko 2009 - Nobel Prize for Chemistry to Ada

2004 - Nobel Prize for Chemistry to Aaron Ciechanover, Avram Hershko

2009 - Nobel Prize for Chemistry to Ada Yonath

Israel is Punching Above its Weight

2005 - Wolf Prize for Medicine to Alex Levitski

2008 - #1 and #2 best places to conduct lifescience research to the Weizmann Institute and the Hebrew University

# 96 in terms of population…

© 2011 OrbiMed Advisors, LLC. All Rights Reserved. CONFIDENTIAL

Page 19: Sustaining Innovation in Israel: Policy and Finance for Global ... · 2004 - Nobel Prize for Chemistry to Aaron Ciechanover, Avram Hershko 2009 - Nobel Prize for Chemistry to Ada

Demonstrated exits through multiple venues

45

45 10 3 103

M&A IPO TASE

IPO NASDAQ

IPO OTHER

TOTAL

Biopharma Device

Holding

Source: TASE, NASDAQ, IVC, press. Does not include all of 2010

Number of transactions 1995-2010

© 2011 OrbiMed Advisors, LLC. All Rights Reserved. CONFIDENTIAL

Page 20: Sustaining Innovation in Israel: Policy and Finance for Global ... · 2004 - Nobel Prize for Chemistry to Aaron Ciechanover, Avram Hershko 2009 - Nobel Prize for Chemistry to Ada

Anath Levin Bank Hapoalim

Policy and Finance for Global Competitiveness

Page 21: Sustaining Innovation in Israel: Policy and Finance for Global ... · 2004 - Nobel Prize for Chemistry to Aaron Ciechanover, Avram Hershko 2009 - Nobel Prize for Chemistry to Ada

Financial assets composition (%)

Source: BoI Dec. 2010

Israeli investment portion in

stocks is 25.8% in comparison to

38% in the U.S.

Page 22: Sustaining Innovation in Israel: Policy and Finance for Global ... · 2004 - Nobel Prize for Chemistry to Aaron Ciechanover, Avram Hershko 2009 - Nobel Prize for Chemistry to Ada

Israelis’ institutional investors overseas investments

Source: BoI

Page 23: Sustaining Innovation in Israel: Policy and Finance for Global ... · 2004 - Nobel Prize for Chemistry to Aaron Ciechanover, Avram Hershko 2009 - Nobel Prize for Chemistry to Ada

Foreign investors holdings rate in governments bonds (% of debt)

Source: OECD & BHI

Page 24: Sustaining Innovation in Israel: Policy and Finance for Global ... · 2004 - Nobel Prize for Chemistry to Aaron Ciechanover, Avram Hershko 2009 - Nobel Prize for Chemistry to Ada

Source: CBS

Foreign investment in Israel

•  0.4% of 71 billion $ corporate bonds market is held by foreign investors

•  3.6% of 112 billion $ tradable government bonds market is held by foreign investors

Page 25: Sustaining Innovation in Israel: Policy and Finance for Global ... · 2004 - Nobel Prize for Chemistry to Aaron Ciechanover, Avram Hershko 2009 - Nobel Prize for Chemistry to Ada

10 years governments bonds yields in local currency

Source: Blumberg & BHI

Page 26: Sustaining Innovation in Israel: Policy and Finance for Global ... · 2004 - Nobel Prize for Chemistry to Aaron Ciechanover, Avram Hershko 2009 - Nobel Prize for Chemistry to Ada

Source: TASE *March 2011

mainly the Large companies

Distribution of companies by % of free float Israeli stocks – Total market value (billion $)

•  Minimal market value for a company to enter TA-25 index is 1.4 billion $.

•  13 companies in TA-25 index there percent of free float is higher than 50%

•  TA-25 index concentrates 55% of the stocks trading volume in the TASE.

The market is limited…

Page 27: Sustaining Innovation in Israel: Policy and Finance for Global ... · 2004 - Nobel Prize for Chemistry to Aaron Ciechanover, Avram Hershko 2009 - Nobel Prize for Chemistry to Ada

•  Israel’s weight in the MSCI EM – 2.9% •  Israel’s weight in the MSCI WORLD – 0.4%

Foreign investments in TASE quarterly data US$ millions

change

Page 28: Sustaining Innovation in Israel: Policy and Finance for Global ... · 2004 - Nobel Prize for Chemistry to Aaron Ciechanover, Avram Hershko 2009 - Nobel Prize for Chemistry to Ada

114

242

245 Above 50%

Source: TASE *March 2011

mainly the Large companies

Distribution of companies by % of public holdings

Page 29: Sustaining Innovation in Israel: Policy and Finance for Global ... · 2004 - Nobel Prize for Chemistry to Aaron Ciechanover, Avram Hershko 2009 - Nobel Prize for Chemistry to Ada

Source: TASE *March 2011

Israeli stocks – total market value ($ billion)

Page 30: Sustaining Innovation in Israel: Policy and Finance for Global ... · 2004 - Nobel Prize for Chemistry to Aaron Ciechanover, Avram Hershko 2009 - Nobel Prize for Chemistry to Ada

Source: TASE *March 2011

Average daily volume trading ($ million)

Page 31: Sustaining Innovation in Israel: Policy and Finance for Global ... · 2004 - Nobel Prize for Chemistry to Aaron Ciechanover, Avram Hershko 2009 - Nobel Prize for Chemistry to Ada

-­‐6.7%  

-­‐0.7%  

12.3%   13.5%  

-­‐25.7%  

-­‐8.3%  

-­‐2.0%  

25.9%  

Higher education High school Secondary Pre-school

Change in public expenditure per student, 1999-2006, percentage of GDP

OECD

Israel Source: Dan Ben David, Taub Center and TAU. Data: OECD

Page 32: Sustaining Innovation in Israel: Policy and Finance for Global ... · 2004 - Nobel Prize for Chemistry to Aaron Ciechanover, Avram Hershko 2009 - Nobel Prize for Chemistry to Ada

Source: Dan Ben David, TAU. Data from Israel Social Security Institute

Income inequality in Israel, 1979-2006

Page 33: Sustaining Innovation in Israel: Policy and Finance for Global ... · 2004 - Nobel Prize for Chemistry to Aaron Ciechanover, Avram Hershko 2009 - Nobel Prize for Chemistry to Ada

Dependency ratios*, 2008 Israel and 27 OECD countries (percent)

Source: Dan Ben David, TAU. Data: World bank

Page 34: Sustaining Innovation in Israel: Policy and Finance for Global ... · 2004 - Nobel Prize for Chemistry to Aaron Ciechanover, Avram Hershko 2009 - Nobel Prize for Chemistry to Ada

Male non-employment rates, Israel and OECD 1979-2008, as a percent of 35-54 year-old male population

Source: Dan Ben David, Taub Center and TAU. Data: OECD, CBS

Page 35: Sustaining Innovation in Israel: Policy and Finance for Global ... · 2004 - Nobel Prize for Chemistry to Aaron Ciechanover, Avram Hershko 2009 - Nobel Prize for Chemistry to Ada

Male non-employment rates, 1979-2008 As a percent of 35-54 year-old male population

Source: Dan Ben David, Taub Center and TAU. Data: OECD, CBS

Page 36: Sustaining Innovation in Israel: Policy and Finance for Global ... · 2004 - Nobel Prize for Chemistry to Aaron Ciechanover, Avram Hershko 2009 - Nobel Prize for Chemistry to Ada

Rate of non-employment in Israel By sectors, 2008. As a percentage of total population ages 35-54

Source: Dan Ben David, Taub Center and TAU. Data: OECD, CBS

Page 37: Sustaining Innovation in Israel: Policy and Finance for Global ... · 2004 - Nobel Prize for Chemistry to Aaron Ciechanover, Avram Hershko 2009 - Nobel Prize for Chemistry to Ada

Main indices 10 years’ accumulated returns 2000-2009

Source: Bloomberg * Converted to US dollars

Page 38: Sustaining Innovation in Israel: Policy and Finance for Global ... · 2004 - Nobel Prize for Chemistry to Aaron Ciechanover, Avram Hershko 2009 - Nobel Prize for Chemistry to Ada

Number of Israeli life sciences companies A decade of rapid growth

Source: ILSI Database - 2009

• From 250 companies in 1998 to almost 800 companies in 2008

• An average of 55 new companies being formed per year over the last decade

• 40% of all life science companies operating in Israel today are less than 6 years old

Page 39: Sustaining Innovation in Israel: Policy and Finance for Global ... · 2004 - Nobel Prize for Chemistry to Aaron Ciechanover, Avram Hershko 2009 - Nobel Prize for Chemistry to Ada

Source: www.uspto.gov Analysis: ILSI ©

Innovation: U.S. granted patents per capita Number of bio-pharma patents per million capita

Page 40: Sustaining Innovation in Israel: Policy and Finance for Global ... · 2004 - Nobel Prize for Chemistry to Aaron Ciechanover, Avram Hershko 2009 - Nobel Prize for Chemistry to Ada

Source: www.uspto.gov Analysis: ILSI ©

Innovation: U.S. granted patents per capita Medical device patents per million capita

Page 41: Sustaining Innovation in Israel: Policy and Finance for Global ... · 2004 - Nobel Prize for Chemistry to Aaron Ciechanover, Avram Hershko 2009 - Nobel Prize for Chemistry to Ada

Israel’s life sciences industry: sectors

Source: ILSI Data Base – 2009

Page 42: Sustaining Innovation in Israel: Policy and Finance for Global ... · 2004 - Nobel Prize for Chemistry to Aaron Ciechanover, Avram Hershko 2009 - Nobel Prize for Chemistry to Ada

Israel: GDP growth Average growth rates per period

“The lost decade” 3.4%

Immigration wave, globalization and

Hi-Tech 5.7%

Re-growth 5.0%

Fast growth 11%

Market liberalization

3.8%

Burst of Hi-Tech bubble and the

“Intifada” 0.3%

World crisis 0.8%

Page 43: Sustaining Innovation in Israel: Policy and Finance for Global ... · 2004 - Nobel Prize for Chemistry to Aaron Ciechanover, Avram Hershko 2009 - Nobel Prize for Chemistry to Ada

GDP per capita US$ thousands, PPP, 2009

Source: IMF

Page 44: Sustaining Innovation in Israel: Policy and Finance for Global ... · 2004 - Nobel Prize for Chemistry to Aaron Ciechanover, Avram Hershko 2009 - Nobel Prize for Chemistry to Ada

Global economic crisis - growth rates

Page 45: Sustaining Innovation in Israel: Policy and Finance for Global ... · 2004 - Nobel Prize for Chemistry to Aaron Ciechanover, Avram Hershko 2009 - Nobel Prize for Chemistry to Ada

Israel: Public debt as a percent of GDP, 2010

Source: OECD

Page 46: Sustaining Innovation in Israel: Policy and Finance for Global ... · 2004 - Nobel Prize for Chemistry to Aaron Ciechanover, Avram Hershko 2009 - Nobel Prize for Chemistry to Ada

Inflation in Israel during the last two decades

Page 47: Sustaining Innovation in Israel: Policy and Finance for Global ... · 2004 - Nobel Prize for Chemistry to Aaron Ciechanover, Avram Hershko 2009 - Nobel Prize for Chemistry to Ada

Israel: current account balance % of GDP

Page 48: Sustaining Innovation in Israel: Policy and Finance for Global ... · 2004 - Nobel Prize for Chemistry to Aaron Ciechanover, Avram Hershko 2009 - Nobel Prize for Chemistry to Ada

Foreign Currency Exchange Rates

Euro

US dollar

Page 49: Sustaining Innovation in Israel: Policy and Finance for Global ... · 2004 - Nobel Prize for Chemistry to Aaron Ciechanover, Avram Hershko 2009 - Nobel Prize for Chemistry to Ada

Forecast of domestic demand and supply Of Natural Gas from the Tamar and Leviathan Reservoirs