A little more than four years after launching its first Israeli biotech fund with $222 million, OrbiMed has upped the ante for its second fund to $307 million.
To hear OrbiMed execs tell it, the country has developed into one of the most active healthcare/biotech hubs in the world, with around 100 new companies being created each year.
“There are plenty of opportunities and there’s a complete lack of capital,” says Jonathan Silverstein, a partner and a co-head of global private equity. Prices are also lower than similar technologies in the U.S., he adds, noting that the fund will cover everything from drug development to devices, diagnostics and digital health.
That gives OrbiMed plenty to pick from, but Silverstein is quick to add that there should be another two or three venture funds scouring Israel for investments like these.
As it stands, OrbiMed brings in partners like Johnson & Johnson ($JNJ) and GE ($GE) to participate in its syndicates for these companies. Occasionally it will also involve its other funds--including the $950 million Fund VI set up late last year--in its Israeli bets. The VC firm operates an incubator in the country with J&J and Takeda, and the Office of the Chief Scientist in Israel has been known to be generous in its support of the local biotech scene. The OCS contributes up to 85% of annual R&D costs for companies operating in their incubator. The other 15% is funded equally by OrbiMed, J&J and Takeda over a period of several years.
Unlike the first OrbiMed fund, the Israeli government isn’t coming back in to invest in Fund II. But OrbiMed’s Nissim Darvish, a team member in Israel working alongside Erez Chimovits and Anat Naschitz, says the government’s support for the industry remains a crucial part of the overall success of the hub.
Their biggest exit to date is the $605 million Merck ($MRK) buyout of cCAM, which included a $95 million upfront for a company in early-stage development with a checkpoint protein target.
“This company alone can return the whole first fund,” said Darvish. Add in some more scores like that, and OrbiMed may not be operating solo much longer. In the meantime, it’s begun selecting new companies to add to the 17 established with the first fund. With more resources, OrbiMed expects to see the next wave swell to 20 or more new companies.
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