(photo credit: Ariel Jerozolimski)
“In 2008, before the crisis, there was almost too much money in the industry,” Windhover Information Inc. managing director for medical devices David Cassak told Globes.
“Today, funds look like victims of the crisis. But during the financial bubble, they also shared in the feeling: There were too many companies and some of them were not carefully managed.
Cassak was in Israel last month to attend the Healthcare Innovation Summit. It was organized by the Israel Life Science Industry and Tel Aviv University’s Lahav Executive Education Programs and was led by Tamir Fishman Ventures managing general partner Benny Zeevi.
“Today, we see a degree of recovery, and investors in funds are beginning to look for funds to return to,” Cassak said.
But he doesn’t believe all funds will recover, simply because they failed to achieve enough good returns.
“Total investment in venture capital fell,” he said. “Happily, the
medical-devices share of the pie has remained more or less the same,
even though there are companies that could have obtained financing in
2007 but not in 2011.”
The venture-capital funds that recover will have to deal with a new world in the medical- devices market, Cassak said.
“Due to the consolidation of buyers and prevailing uncertainty in the
industry, exits almost never exceed $100 million any more,” he said.
“It’s necessary to be cautious and invest no more than $25 million to
$30 million in a company to get the hoped-for return.”
The problem is that the United States Food and Drug Administration has
tightened procedures for obtaining K510 fast-track approval for medical
devices, and it can now cost a company up to $40m. This is even before
There has been less medical innovation over the past few years, Cassak
said. The number of products approved under the K510 process has fallen.
In addition, for a well-run US company, time to exit has lengthened
from six to seven years, to an average of nine years today.
Venture-capital funds are also investing in products at later stages of development.
The most important factor is US President Barack Obama’s health-care
reform, which is supposed to lower prices for medical devices when they
reach the market. The reform might even initiate a vicious circle, by
causing large medicaldevices companies to buy more carefully, thereby
“We don’t yet see a fall in prices for products on the market,” Cassak said. “For now, it’s only psychological.
“It’s possible that now, after the midterm elections and the Republican
majority in the House of Representatives, the health-care reform will
slow and weaken. If in the past it was clear that it would be possible
to charge premium prices for a new and better product, that’s no longer
Globes: What are the hot fields in this freeze? Cassak: “The usual
sectors, orthopedics and cardiology, are still holding on. Ophthalmology
is also strengthening, and diagnostics has developed. I’d actually
advise investors to look for the lukewarm sectors, because that’s where
the opportunities are.”
Which Israeli companies seem promising to you? “There are so many of
them, in cardiology, ophthalmology, urology and gynecology. Lumenis Ltd.
is making a strong comeback; Given Imaging Ltd., despite its
limitations, is marketing sexy technology; Biocontrol Medical Ltd. and
Brainsgate Ltd., which are based on inventions by Yossi Gross, are
telling great clinical stories, but it’s hard to know how the market
will receive them; Cornidus Vascular Robotics Ltd., cofounded by Dr.
Rafael Beyar, has developed a nice robotic device and will reach the
“Most large companies hold the Israeli medical-devices market in high
esteem. I’d take a risk and say that there are companies around the
world that consider it even more interesting than the US.”