Israeli digital health innovation a 'compelling opportunity' for investors

Digital health start-ups raised a record $511m. in financing in 2018, and already raised some $214m. during the first quarter of 2019.

MAY 11, 2019 17:34

OrbiMed Israel managing director Anat Naschitz (photo credit: Courtesy) — OrbiMed Israel managing director Anat Naschitz

(photo credit: Courtesy)

Israel’s vibrant digital health innovation sector is a “very compelling opportunity” for international investors, according to OrbiMed Israel managing director Anat Naschitz.

Headquartered in New York, healthcare-dedicated investment firm OrbiMed Advisors manages approximately $13 billion in assets across the healthcare spectrum. It launched its first Israeli fund in 2011.

“There is a strong hi-tech industry in Israel and the country is recognized worldwide as the number two hub for technology after Silicon Valley,” Naschitz told The Jerusalem Post at OrbiMed’s Herzliya office.

“What is great here is that the vast majority of the founders of digital health companies are techies who wanted to solve healthcare. Which is wonderful, because they bring a different way of thinking and complementary networks, including the tech giants entering this space that could end up acquiring the companies.”

Israel’s digital health start-up ecosystem has expanded rapidly in recent years. Today, 537 companies are operating in the field, according to a recent report by Start-Up Nation Central.

Digital health start-ups raised a record $511m. in financing in 2018, and already raised some $214m. during the first quarter of 2019.

In early 2018, the government approved a NIS 1 billion ($300 million) five-year national digital health plan which includes technological development, international cooperation, concentrated academic and industrial efforts and regulatory changes to encourage data research.

“There is this flourishing environment where everybody wants to play. Maybe they don’t come from healthcare but they can see the potential and have the ability to realize it,” Naschitz said.

“That’s productive because they hire people who come from the industry, and complement the team toward the right product.”

On Tuesday, Naschitz will co-chair, alongside OurCrowd Qure managing partner Allen Kamer, the artificial intelligence and digital health track of the MIXiii-BIOMED 2019 Conference taking place May 14-16 in Tel Aviv.

Naschitz attributes much of Israel’s emergence as a leader in digital health to a combination of a strong tech industry and rich electronic health records covering approximately 98% of the population and spanning decades.

“Everything has been computerized and hospitals are able to share information. Health maintenance organizations (HMOs) sitting on this data have been forward-thinking in enabling companies to work with them,” she said.

In May 2016, OrbiMed closed its second Israel-focused venture capital fund with approximately $307m. in commitments, backed by several of the world’s largest healthcare companies.

Israeli entrepreneurs differ from their American colleagues, Naschitz added, in terms of their approach to innovation.

“Particularly in digital health, if you look at the US and Israel in terms of types of companies developed, you’ll see more in the US that are trying to fix the healthcare system,” Naschitz said.

“There are fewer of them in Israel and that’s a good thing. In this industry, we should be focusing on developments that are universal, that go to the core of life-sciences.”

This is underlined by the dominance of artificial intelligence in Israeli digital health innovation. Some 85% of the sector’s total 2018 financing went to health companies relying on some form of machine learning, compared to just 25% in the US.