Buzz: OrbiMed mulls $250M Israeli investment fund

OrbiMed Advisors is reportedly laying the groundwork for a second Israeli life science investment fund. And after four years of positive results for its initial government-partnered foray into the country, the big-name biotech VC shop is prepared to try to raise $250 million (€235 million) without state support.

OrbiMed Israel Senior Managing Director Dr. Nissim Darvish

Globes broke news of the fund after seeing a presentation outlining the start of the fundraising process. Preparations are at an early stage--investors have yet to come on board--but the basic plan is in place. Just like its first Israeli fund, OrbiMed is aiming to raise north of $200 million and dole it out in a series of $5 to $20 million investments. The strategy will see OrbiMed add up to 15 Israeli life science companies to its burgeoning portfolio. To date, OrbiMed has invested $130 million in 19 Israeli life science companies. Around $100 million of the first fund is yet to be used.

The outlays give OrbiMed data to back up its discussions with potential investors. The first fund--which paired $203 million of private cash with $48 million of state support--has contributed to OrbiMed's Israel portfolio reportedly achieving an internal rate of return of 21.4%. And while the initial investments behind most of the portfolio's 6 complete or partial exits predate the creation of the first fund dedicated to Israel, paydays such as BioLineRx's ($BLRX) record biomedical IPO and Given Imaging's sale to Covidien ($COV) mean OrbiMed is starting to establish a track record.

If OrbiMed goes ahead with the second fund, it will represent a small victory for the government. Back when the government tapped OrbiMed to set up an Israel-focused fund in 2010, VC money was scarce and state support for life sciences had failed to create a thriving industry. The medical device industry was seen as a success story, but biotech was yet to take off. Now, OrbiMed is seemingly confident enough to have a second run at the country without state support and other investors have followed, too.

Johnson & Johnson ($JNJ) and Takeda are running an incubator with OrbiMed. And Novartis ($NVS) has moved to increase its access to Israeli startups through a tieup with BioLineRx. While doubts about the quality of some of the clinical data generated in Israel still linger--and were exacerbated by the Hyperion Therapeutics ($HPTX)-Andromeda scandal--the ecosystem looks healthier than in 2010.   

- read Globes' article

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