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Sustaining Innovation in Israel: Policy and Finance for Global Competitiveness
Wednesday, May 4, 2011 4:00 PM - 5:15 PM
Anat Naschitz Managing Director
OrbiMed Israel
Innovative financing for Israeli lifesciences
© 2011 OrbiMed Advisors, LLC. All Rights Reserved. CONFIDENTIAL
OrbiMed – global HC investment firm
OrbiMed Israel
Israeli lifescience
$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
>100 exits over the past 15 years
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
Good early stage infrastructure Supporting creation of 50-70 new companies p.a.
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
1,000 companies
thriving industry
~$70m p.a. available locally
VCs contract globally
Funding gap, no global infrastructure
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)
Government intervention
Invested
Got
What’s in it for the government: leverage
government anchor
Preferred returns, 1st in distributions
Government gives away 80% of its returns
Set management fee
Favorable terms for LPs
Government benefit – example
Assumes fund size maximizes government benefit (4:1 ratio amount invested by LPs:government)
Prolific underlying industry Funding gap -> cheap Clever structure Open mind
Ingredients for success
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
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
Anath Levin Bank Hapoalim
Policy and Finance for Global Competitiveness
Financial assets composition (%)
Source: BoI Dec. 2010
Israeli investment portion in
stocks is 25.8% in comparison to
38% in the U.S.
Israelis’ institutional investors overseas investments
Source: BoI
Foreign investors holdings rate in governments bonds (% of debt)
Source: OECD & BHI
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
10 years governments bonds yields in local currency
Source: Blumberg & BHI
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 $.
• 13 companies in TA-25 index there percent of free float is higher than 50%
• TA-25 index concentrates 55% of the stocks trading volume in the TASE.
The market is limited…
• Israel’s weight in the MSCI EM – 2.9% • Israel’s weight in the MSCI WORLD – 0.4%
Foreign investments in TASE quarterly data US$ millions
change
114
242
245 Above 50%
Source: TASE *March 2011
mainly the Large companies
Distribution of companies by % of public holdings
Source: TASE *March 2011
Israeli stocks – total market value ($ billion)
Source: TASE *March 2011
Average daily volume trading ($ million)
-‐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
Source: Dan Ben David, TAU. Data from Israel Social Security Institute
Income inequality in Israel, 1979-2006
Dependency ratios*, 2008 Israel and 27 OECD countries (percent)
Source: Dan Ben David, TAU. Data: World bank
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
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
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
Main indices 10 years’ accumulated returns 2000-2009
Source: Bloomberg * Converted to US dollars
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
Source: www.uspto.gov Analysis: ILSI ©
Innovation: U.S. granted patents per capita Number of bio-pharma patents per million capita
Source: www.uspto.gov Analysis: ILSI ©
Innovation: U.S. granted patents per capita Medical device patents per million capita
Israel’s life sciences industry: sectors
Source: ILSI Data Base – 2009
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%
GDP per capita US$ thousands, PPP, 2009
Source: IMF
Global economic crisis - growth rates
Israel: Public debt as a percent of GDP, 2010
Source: OECD
Inflation in Israel during the last two decades
Israel: current account balance % of GDP
Foreign Currency Exchange Rates
Euro
US dollar
Forecast of domestic demand and supply Of Natural Gas from the Tamar and Leviathan Reservoirs