The term “biomed” has become, over the past two years, a magical word. Dozens of
biomed companies have held public offerings on the local capital market and have
allowed Israel’s investing public to take part in the dream of the “next
Hadasit Bio Holdings Ltd., which became public within moments of
being established, allows that same public to take part in that same dream, but
in a slightly different way from what it had been used to until now.
seeds of Hadasit Bio were planted 93 years ago, when the original version of
Hadassah Hospital was set up on Jerusalem’s Rehov Hanevi’im. With time,
the hospital became one of the largest medical institutions in Israel and one of
its leading medical R&D centers.
About a quarter-century ago, when
the local technology and venture-capital industries began to flourish, the
hospital decided that the research and development center that it built could
generate exits, and it set up Hadasit – the Technology Transfer Company of
Hadassah Medical Organization, which today is one of the shareholders in Hadasit
The goal of Hadasit was fairly simple: to advance and commercialize
the intellectual property and R&D capabilities in the medical and biotech
sectors, whose source, whether in part or in whole, was the hospital and its
researchers. Commercializing those intellectual property and/or R&D
capabilities happened, in most cases, through granting licenses to
pharmaceutical or biotech companies to use the intellectual property and
capabilities, in return for receiving future royalties.
To turn an idea
into a commercial product, lots of money is needed. So six years ago, Hadasit
established a subsidiary, Hadasit Bio, took it public on the TASE and raised $8
million for it. Later, through convertible debt issues, private placements and
rights offerings, Hadasit Bio raised another $19m. and set off.
Bio was intended to provide an answer to an unmet financial need, which is
“crossing the valley of death in the drug development process,” as the company
describes it. In a first stage, a start-up needs about $50,000-$500,000 to
conduct first clinical trials, register a patent with the patent office and for
Sources of capital for that stage are primarily angel
investors and academic institutions.
In the second and later stages, the
start-up needs more than $50m. to conduct clinical trials. Sources of capital
for those stages are primarily VC funds and pharmaceutical
Between those two stages, there are substages that need more
funding (such as to finance animal trials and applying for FDA approval of human
clinical trials), but it is harder to find funding sources.
valley of death.
“This is the stage where we come into play,” says
Hadasit Bio CEO Ophir Shahaf.
Hadasit Bio works for its portfolio
companies, which it chooses from those of its parent company, Hadasit. It looks
to find financing for first human trials, and immediately afterward (on average,
about a year and a half after the start), the company works to find a strategic
partner – usually a pharmaceutical company that will bring the portfolio company
to the next stage in its life.
Currently, Hadasit Bio’s portfolio
consists of eight companies at various stages of development; four have begun
Phase I/II trials, and the others will begin Phase I/II trials within a year to
a year and a half. The eight companies operate in one of the three areas
on which Hadasit has decided to focus: oncology, autoimmune diseases and tissue
engineering and stem cells.
Hadasit Bio’s business model is somewhat
unusual from both a local and global perspective.
On capital markets, and
not just Israel’s, there are biomed or biopharma companies, and there are VC
funds such as Teuza – A Fairchild Technology Venture Ltd. and Tamir Fishman
Venture Capital. But there are no holding companies that hold a portfolio of
start-ups, backed by a world-class research institution such as
Hadasit and VC firms are different in several ways. VC funds
are limited in their investment horizon and must produce returns within a preset
time frame. They have a wider capital base, which allows them to invest in many
companies at the same time, but prevents them from being involved in their
Hadasit Bio, in contrast, has more stamina, though
as a public company it does need to show results for its investors; the ability
to be involved in the day-to-day running of its portfolio companies; and no less
important, a nearly infinite deal flow of start-ups, as the commercial arm of
“Even the best venture-capital fund will always need
to work hard to convince the most brilliant entrepreneur to allow it to invest
in his or her invention,” Shahaf says. “Hadasit Bio doesn’t have that
In fact, Hadasit Bio has exclusivity on any future development
that arises within the hospital’s walls. But the company chooses in which
developments to invest, according to preset criteria.
inherent in the Hadasit Bio business model does not necessarily come from
Hadassah. Global pharmaceutical giants, including Teva Pharmaceutical Industries
Ltd. and Pfizer, have changed their approach in recent years, and instead of
acquiring companies after they prove the effectiveness on people of their
developments, they buy them or invest in them much before the clinical trial
stage, with the goal of widening their product offering and reducing the damage
that will hit them in the future as the patents on their innovative drugs
Shahaf does not have a medical degree, and he is a lawyer by
training. However, his role has given him in-depth knowledge of medical concepts
that others have a hard time digesting. Shahaf is the person who decides in
which developments at Hadasit (the parent) Hadasit Bio will invest.
decisions are made based on four criteria: The development has a giant target
market whose value is at least close to $1 billion; the time to clinical trial
is between a year and a year and a half; the patent needs to be relatively
“young,” not at a point where it has “burned” most of its years in effect
(patents generally are given for 20 years); and the development has successfully
passed the feasibility stage.
Shahaf is aware that investors in the
capital market are quite impatient and prefer Hadasit Bio’s portfolio companies
to be sold, rather than wait for the day when they receive royalties.
am an equity player,” he says, “and so I will always prefer to sell a company –
in whole or in part – to a player like Teva.”
Whether to sell or not,
Hadasit Bio still does not have a sufficient track record. But Shahaf feels
comfortable enough with three out of his eight portfolio companies: Enlivex
Therapeutics, which is in talks to bring in another investor; Cell Cure, in
which Teva invested $1m.; and BioMarCare Technologies, which is also nearing a
collaboration with a third party.
Shahaf says Hadasit Bio expects to
invest in at least one other company out of Hadassah this year, and the company
is considering other possible investments in the medical-device
“Our investment strategy is called ‘revolving door,’” he
It is likely that Hadasit Bio will take leave of one of its
portfolio companies this year, Shahaf says, adding, “You also have to know when
to turn off the faucet.”