March 2, 2010
Talking with two L.A. locals about why Israel’s healthcare startups are successful
Explaining why Israel enjoys global prominence in the healthcare business even though it’s a tiny country is a daunting task. Dan Senor and Saul Singer’s book, “Start-up Nation: The Story of Israel’s Economic Miracle,” attempts to. It spotlights the tech-savvy, ambition, resourcefulness and chutzpah of Israeli entrepreneurs and acknowledges the successes of some Israeli healthcare startups.
For instance, Senor and Singer mention the Pill Cam, the first pill with a camera inside (so that patients can swallow the pill rather than face invasive surgery).
But the book’s focus is broad.
Fortunately, David Fischel and Brian Neman, two L.A. locals in their early twenties, have experience with Israeli healthcare startup companies.
In 2007, while Fischel studied at Bar Ilan University in Tel Aviv for a master’s degree in business, he worked for SCP Vitalife, a healthcare venture capital fund. One of Vitalife’s prominent investments, Argo Medical Technologies, has been developing a medical device to help paraplegics walk.
Last summer, Neman worked as an intern with Oramed, an Israeli biotech company in Jerusalem. The company is on the brink of revolutionizing Diabetes treatment.
RT: First of all, what are the differences between biotechology, pharmaceuticals and medical devices?
Fischel: Biotech drugs are typically proteins and antibodies. Pharmaceuticals are chemical substances—they have molecular interactions with our bodies. Medical devices are tools—they are physical objects such as catheters and imaging devices. Israel is a powerhouse in medical devices.
RT: Why do you think that is?
F: Well, whether your company specializes in pharmaceuticals, biotech or medical devices, there is a path you have to take. If you’re doing pharm or biotech, you have to find the chemical entity or the protein you think that’s going to affect the body positively. You have to develop it, test it on animals and patients, do clinical trials, and then you need to get regulatory approval. For a drug it’s much harder than what is required for developing medical devices. It takes a lot more time and money to market a drug. For a device, it usually takes a shorter amount of time.
It’s also partially because it requires less time and less money. In small countries with limited sources you can create value [quicker] with a device than with a drug. If you need hundreds of millions to develop a drug, it’s tough in a small country like Israel.
Lastly, medical devices fit with the Israeli mentality. Israelis like something that’s quick, gets off the ground, [something] you can see tangentially the results of in shorter periods of time and you can see money in [in] a shorter period of time. In the short term, you can see results.
It also fits with the strength of Israeli education, which is much more based in mechanical engineering and electrical engineering than purely biotech. In medical devices, you don’t need that much of a medical background. If you look at a surgery, you might have an idea for how it could be done better. You don’t need the chemical background that you would need for biotech.
RT: Brian, how did you become interested in biotech?
Neman: There is potential to positively impact a lot of lives. That is really important to me. I add a value to that no matter what my salary is. And Israel is the best place to do it. Why do I say that? Relationships. You see Hadassah hospital and Tel Aviv Medical Center with
Oramed is a blossoming company because of those relationships. It’s sad to see that companies in the U.S. don’t use that synergistic relationship like companies in Israel [do]. Oramed gets a very good sum of money from the Office of the Chief Scientist (OCS) [at the Ministry of Industry, Trade and Labor in Israel]. Someone in a government position there knows that there is value in scientific technology. The government in Israel is pretty pleased with innovation.
RT: Can you say more about how the Israeli army relates to these startups?
N: Startups have four or five employees. Any start up in general has four or five employees. That team building comes from the army. The army is built of small teams of four or five guys getting together in self-managed teams [“Start-up Nation” says more on this].
RT: Does the U.S. view Israeli startups as competition?
N: Not really. Israel realizes that its talent and real strength lies in the development and technology. You see startup companies left and right in Israel that have the confidence to say an American company is going to buy them out. I don’t know the future plans of Oramed, but for the most part, Teva and only a few others have turned into worldwide companies. Teva is the largest generic pharmaceutical manufacturer in the world.
From what I’ve seen, the plan is to develop the technology, show that it is feasible and dump it off to an American company. A lot of companies in general develop these technologies and have no plans to commercialize them on a large scale. You’re not going to see a lot of Israeli startups doing advertising and distribution in the U.S. They call Israel the “Start-up Nation” because there are a lot of startups. These companies don’t go on to be like Teva, to have a worldwide presence, to have a worldwide regard. They allow an American company to do a merger and acquisitions.
Fischel works for his family’s healthcare hedge fund, the L.A.-based Dafna Capital Management. The fund invests primarily in biotech and medical devices. Fischel focuses on medical devices.
Neman is currently in graduate school at U.S.C., working toward a master’s degree in healthcare administration.