When Dr. Daniel Teper, a French-born and educated businessman who worked much of his career in the United States, made aliya with the vision of founding a biotech company, he was disappointed by what he saw when he arrived.
Though rumors had reached his ear that the biotech ecosystem was flowing with milk, he discovered that some crucial elements were missing.
“You need a proper ecosystem to grow any industry,” the founder and CEO of Immune Pharmaceuticals said. “Israel has some of the ingredients, but it’s missing others. Management is a big gap. People say that Israelis are not very good managers in general.”
On the one hand, Israel had great R&D happening in its universities, Teper said, but attracting serious investment was a challenge.
Companies in biotechnology had longer time horizons for investors, being that they cannot simply produce some sort of technology and sell out like other tech start-ups, he said. They require years of development, clinical trials and regulatory approvals. Israel had the research chops to produce great drugs, but difficulty in scaling up, he said.
Israel’s biggest biotech company, Teva, is a giant, but its focus on generics made creating an innovation pipeline less important, Teper said. To fill the gap, good management was needed.
When Teper founded Immune, he found that he needed a strategy to get around the holes in the marketplace.
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Instead of building from the ground up in Israel, the company had to import much of its management and even acquire start-ups from the US to get its house in order.
Once they had control of a good product in the US, they went public, raising $20 million on the Nasdaq Stock Market.
“We had to go back to the US, acquire US companies, go public there, and now, finally, at the end of 2014 we have the proper financial structure, portfolio of projects and proper management to they can reinvest or invest and build something in Israel that is substantial,” Teper said.
Part and parcel of that strategy was relying on other new immigrants who had skills and experience cultivated abroad, he said.
“They know the industry, they know the science, why not use the advantage that olim hadashim [new immigrants] bring to the table?” Teper said.
People coming here who spent 20 years in the pharma industry or in management have a different bias than the average Israeli investor, he said.
One thing Teper is convinced will help grow the ecosystem is a variety of mid-sized companies, which he thinks an imported management strategy can help build.
“The government has to be convinced that 10 to 20 substantial companies is better than 500 companies that are just transferring tech from the university,” he said. “Instead of fixating on bringing Pfizer to Jerusalem, make sure you have 10 to 20 real biotech companies, and then the multinationals are going to want to be close to these companies.”
Indeed, Israel’s small biomedical companies on the Nasdaq had a poor year, according to Globes. Nine such Israeli companies raised a total of $472 million on the exchange, but their overall value dropped more than 10 percent by yearend, even as the Nasdaq biomed index was up sharply.
“Most of the small biomed companies on Nasdaq had negative returns in 2014, not only the Israeli ones,” Globes reported. “The overall positive trend is attributable to the medium- and largesized companies.”
One reason is that small companies put all their eggs in one basket, hoping that clinical trials for a single drug will rocket them to fortune. If the trials prove the drug a failure, the company has little room for maneuver.
Yet in the drive to grow a mid-size biotech company in Israel, not even Teper’s company is “immune” from the pressures. Immune announced that although it will keep major operations in Israel, it will move its headquarters to New York City, “where we believe that we can better attract top-rate scientific and business talent and be in close proximity to our expanding shareholder base,” according to a letter to shareholders.
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