Philips CEO: 'Spirit of innovation' led company to Israel

Philips CEO Frans van Houten

Royal Philips ($PHG) has grand plans for growth in Israel. CEO Frans Van Houten opened up to Israeli newspaper Globes about the company's med tech ambitions in the country, months after Philips kicked off operations for a new technology incubator in Israel with partner Teva Pharmaceutical Industries ($TEVA).

As Van Houten told Globes, a "search for the spirit of innovation" promoted Philips to increase its activity in Israel by 60% over the past three years. The company has "important relationships with … almost all the major hospitals" in the country, Van Houten said, a foundation that could serve Philips well as it looks to expand the market for its patient monitoring and imaging products.

And Philips boasts a development center in Israel with 850 employees, which includes a medical information management division that helps facilitate patient monitoring. Unlike other med tech companies, Philips also manufactures its technology in the country--a move that allows the company to broaden its footprint while bolstering its imaging business.

"We're producing very special parts here for our imaging systems, and in order to produce components like this, you have to be close to R&D, and the R&D capability is here," Van Houten told Globes. "Incentives and taxation aren't so critical. They have some effect, but that's not what determines the decision where to produce; it's the capability."

Meanwhile, the company is hard at work on its joint technology incubator with Teva, dubbed Sanara Ventures. Earlier this year, Philips and Teva said they would funnel 100 million shekels ($26.5 million) over the next 8 years into early-stage med tech companies in Israel. In July, the pair announced that they invested in two companies: Kaleidoscope Medical, which developed a system for X-ray radiation shielding during catheterization; and MGD, which has a portable device for measuring lung function in patients with chronic obstructive pulmonary disease.

Sanara CEO Assaf Barnea

Under the stewardship of CEO Assaf Barnea, Sanara will fund two or three more companies by the end of 2015, the company said in July. Philips and Teva expect at least a 20% return on the investment, producing three to 5 companies with revenue of at least $200 million in 5 to 7 years, and at least two companies with revenue of $500 million in 7 to 10 years, according to the Globes story.

"Over the year, the Israeli investment community has presented groundbreaking innovation through the global market. We regard Sanara Ventures as an excellent way for Philips to be involved in innovative developments in medical technologies," Van Houten said at Sanara's launch.

- read the Globes story

Special Reports: Top 10 med tech R&D budgets in 2014 - Royal Philips | Top 10 med tech R&D budgets in 2013 - Philips Healthcare