Surge in overseas investment drives Israel to life sci fundraising record

Israel has joined the list of countries that obliterated their life science fundraising records in 2014. Data from IVC Research Center show Israeli life science companies pulled in $801 million (€708 million) last year, a 55% jump on the previous high that was underpinned by foreign investors opening their checkbooks with unprecedented regularity.

Traditionally, Israeli life science startups have looked to the government, local investors and Teva ($TEVA) for money but the mix has shifted in recent years, in part because of a deliberate drive by the state. Almost 60% of the money invested in Israeli life science companies last year came from foreign organizations, a huge increase over the 17% such groups accounted for in 2010. The arrival of foreign money allowed Israeli life science companies to raise more cash than ever last year despite local VCs chipping in 20% less than they contributed in 2011.

The Israeli government has actively encouraged this situation, notably by putting out a call for foreign VCs to set up funds dedicated to the country. OrbiMed Advisors answered the call, bagged money from the government and last year became the most prolific investor in Israeli life science companies for the first time ever. The fund made five initial investments in 2014--a number that saw it tie with Israeli crowdfunding organization OurCrowd--and led the field in total financings with 12.

OrbiMed Israel Senior Managing Director Dr. Nissim Darvish

OrbiMed is now reportedly readying a follow-up to its Israeli-focused fund, while a who's who of biopharma companies have also upped their interest. Johnson & Johnson ($JNJ) and Takeda have helped set up a biotech incubator, joining a trend for private sector involvement in such projects that has made the days when the government was their chief financier a distant memory. Takeda is also making Israel a focus of its VC unit. "I think there's a unique set of conditions here in Israel that make it a great place for us to invest in innovation," Takeda R&D chief Tetsuyuki Maruyama told The Jerusalem Post.

Roche ($RHHBY) and Novartis ($NVS) have extended the tendrils of their investment units into Israel, too, through alliances with Pontifax and BioLineRx ($BLRX), respectively. The trend for biopharma companies to pay closer attention to Israeli startups--which Globes attributes in part to Teva ending its policy of hoovering up any promising company--has coincided with a rise in the number of drug developers. Medtech has traditionally been Israel's strength in life sciences, but last year investment in biopharma companies jumped 60% to $286 million.

To date, many Israeli biotechs have struggled to make an impact globally. And some, notably Andromeda, have burnt their buyers. But with 51 biotechs pulling in investment last year, the pool of possible stars is growing larger.

- read the report (PDF)
- here's JPost's article
- check out Globes' coverage
- and the Times of Israel's take

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