Opportunities for Industrial Cooperation in Israel
MEDICAL DEVICES
Medical Devices Attract Major Overseas Investment

Israel's inter-disciplinary strengths have enabled the development of innovative medical devices and have attracted major foreign investment in recent years. Over the past two years alone, four Israeli medical devices firms have been acquired by large international healthcare companies for more than $1.2 billion dollars.
Johnson & Johnson's Ethicon division acquired Omrix Biopharmaceutical, a provider of bio-surgery and passive immunotherapy products, for $438 million.
Medical device and services company St. Jude Medical acquired MediGuide, a firm focused on inter-body navigation and minimally invasive cardiology, for $300 million, while Medtronic acquired heart valve developer Ventor Technologies for $325 million. Medingo, which develops a miniature insulin dispensing patch for diabetic patients, was acquired by Roche for $200 million including milestone payments for ongoing development. In addition, Medtronic invested $70 million in BioControl, with a commitment to buy the company for $550 million when the start-up's implantable nerve stimulators for the heart receive expected FDA approval in the US in the coming months.
Israel has by far the highest proportion of any country of new patents in this sector per head of the population. Over 400 companies in this field in Israel, about half of the country's Life Sciences sector, encompass a diverse range of medical disciplines including therapeutics, diagnostics, implantables, disposables, monitoring, telemedicine, imaging and medical equipment.
The medical devices sector constitutes a fast growing global market with innovative devices providing breakthroughs in earlier and better diagnoses and medical treatments that bring clinical benefits to patients at a cost savings to the healthcare system and the individual patients.

Inter-Disciplinary Capabilities
Israel's strength in this sector stems from interdisciplinary capabilities, which bring together medicine, clinical expertise, materials science, electronics, software expertise and engineering know-how. Some of the world's leading universities with renowned R&D faculties, leading edge medical centers, the world's highest per-capita number of physicians, and a flourishing high-tech sector combined with a spirit of entrepreneurship have all contributed to the country's dynamic growth in medical devices.
When compared to non-medical high tech, investments in the life science sector is at times costlier and a longer process before reaping financial rewards.
However, it is a more stable investment avenue as demographic and economic trends ensure the sustained interest and need for new technologies and therapies.
Israel's best known medical devices company is Given Imaging, which is redefining the field of gastrointestinal (GI) diagnosis by developing, producing and marketing innovative, patient-friendly products for detecting GI disorders. Given Imaging pioneered capsule endoscopy (a camera in a pill) and today offers a range of video capsules and related products. Traded on the US NASDAQ market, sales climbed 13.3% to $142 million in 2009.
Holding and investment group Elron Electronics, which owns 28% of Given Imaging, has a strong medical device portfolio that included a 50% stake in Medingo (prior to its recent acquisition). Also in Elron's portfolio: BrainsGate (23%), develops electrical stimulation based therapies for central nervous systems diseases; Pocared (23%) develops an innovative laboratory system for real time diagnostics; Impliant (46%) develops spinal implants for motion preservation as an alternative to spinal fusion; and NuLens (34%) develops implantable lens for providing clear vision at all distances. Elron recently sold its 21% stake in Galil Medical, which develops minimally invasive cryotherapy solutions for treatment of tumors.
According to the website of the Israel Life Sciences Industries (ILSI) – www.ilsi.org.il - by far the largest sub-sector in medical devices, which represent 53% of all biomedical companies, is therapeutics (41% of companies) including both disposable and implantable devices. Diagnostics comprises 14%, medical equipment 10%, imaging 9%, monitoring 6% and drug delivery 4%.
These medical device companies cover the full range of medical disciplines. But Israeli firms are especially strong in the cardiovascular arena, followed by other disciplines such as ophthalmology, orthopedics, ob/gyn and oncology.

Diagnostic Imaging
Israel's medical device sector evolved from the country's highly successful medical equipment industry, which was pioneered in the 1980's and 1990's by Elbit, which developed diagnostic imaging technology including innovative nuclear and magnetic resonance imaging and ultra-sound equipment. Elbit eventually sold its diagnostic medical imaging using computer tomography to General Electrics Marconi division, which in its turn was acquired by Philips Medical Systems. Based near Haifa, Philips Medical Systems has annual sales of about $250 million. Similarly, Elbit's diagnostic ultrasound and nuclear and magnetic resonance imaging were sold to GE Medical Care, which today generates annual sales of $270 million in Israel.
Elbit and GE Medical Care's partnership has spawned one of the country's most promising medical device firms – InsighTec. Established in 1999 by Elbit and General Electric, ExAblate 2000, InSightec's first product, is FDA approved, and integrates focused ultrasound thermal ablation with magnetic resonance imaging capabilities to provide a non-invasive method for destroying or ablating targeted tumor tissues. InsighTec plans a summer IPO on the NASDAQ market.
Another veteran Israeli medical device company is Lumenis, initially established in 1991 as ESC Medical Systems and formed several years later following a merger with Coherent Medical Group. Lumenis develops, manufactures, and markets state-of-the-art proprietary laser and intense pulsed light devices for dermatology and aesthetics. Traded on the US NASDAQ market until 2004 Lumenis has annual sales of more than $200 million.
In addition to direct foreign investments from the likes of Johnson & Johnson, Boston Scientific, Medtronic, St. Jude and Guidant, Israel's medical device sector also attracts significant amounts of investment from VC funds and IPOs. Moshe (Mori) Arkin and Dr. Uri Geiger recently founded a seed stage investment fund called Accelmed to invest in Israeli medical devices companies.

Other Multi-National Acquisitions
Johnson & Johnson's acquisition of Omrix was by no means its first major investment in Israel.
The US giant had previously acquired Biosense through its Cordis Division. Biosense provides solutions for endocardial diagnosis and therapy. Johnson & Johnson has also invested in Contec Medical, which develops multimedia information solutions for point of care applications and NESS (Neuromuscular Electrical Stimulation Systems), which provides technological solutions for patients suffering from paralysis due to neurological disorders. The company has also made an investment in Impulse Dynamics- a developer of an active implant to treat chronic heart failure. Johnson & Johnson also partly owns Medigus, a pioneer devel- oper of a unique proprietary endoscopic device for the treatment of gastroesophageal reflux disease. Boston Scientific acquired Mel – Medical Enterprises Group, which develops minimally invasive therapies for the treatment of cancer with a flagship product that induces remission and reduces recurrences of cancer of the bladder.
Boston Scientific has also invested in Sightline, which specializes in the design and development of medical endoscopic systems,. In addition, Boston Scientific invested in BrainsGate that is developing an implantable neuromodulator to treat brain tumors and other neurological disorders and in VisionCare Ophthalmic that has developed an implantable telescope to treat the dry form of Age Related Macular Degeneration. Guidant Technologies acquired X-Technologies in 2003 for about $150 million. X-Technologies, founded in 1999, has developed a pull wire for use with catheters in balloon angioplasty, which effectively treats artery narrowing. Kodak Health acquired Orex Computed Radiography. Orex is developing, manufacturing and marketing low cost computerized radiography products, based on innovative phosphor plates. The technology captures X-ray images digitally, eliminating the need for film development processing

Successful IPOS
Examples of IPOs in addition to Given Imaging include Card Guard, traded on the Swiss Stock Exchange, which has developed advanced telemedicine software and monitoring equipment for high-risk and chronically ill patients, and Oridion Medical, also traded on the Swiss Stock Exchange, develops and manufactures breath-test analyzers, which can detect cancers and ulcers.
Companies traded on the Tel Aviv Stock Exchange include LifeWave, which develops devices using electrical stimulation to treat chronic wounds and MCS Medical Compression Systems, which develops non-invasive compression systems to prevent blood clots in the limbs during surgery.

Other Leading Companies
Other leading medical device companies include: Brainsway is dedicated to the development and marketing of Deep TMS (Transcranial Magnetic Stimluation) systems, a novel, non-invasive medical device for treatment of a wide range of neurological and psychopathological disorders.
Neovasc develops vascular intervention products, while OrSense has obtained EU CE Mark certification to market its non-invasive continuous monitoring solution of hemoglobin and oxygen saturation to hospitals. Deep Breeze has received FDA approval to market its lung imaging system in the US and Biocontrol is developing implantable devices for the treatment of autonomic disorders, in which the nervous system ceases to function properly.

Promising Start-Ups
Among promising start-ups, which have recent raised capital from investors are EarlySense which has developed EverOn, a wireless patient supervision system installed underneath the hospital bed mattress. The system measures patient vital signs and movements and alerts nurses of any change in condition. EverOn detects heart and respiration rates, bed entries and exits, as well as patient movement and turns.
Haifa-based Rcadia, founded in 2005, has developed the COR Analyzer software for the automated analysis of coronary CT angiography, which enables rapid and effective triage of chest pain identifying patients who need further evaluation for severe coronary artery disease. Allium Medical Group and InspireMD are both stent developers. CorAssist Cardiovascular develops novel therapeutic devices for Diastolic Heart Failure (DHF), a condition in which the heart becomes stiff and/or fails to relax, and fills inadequately.
At present the medical devices sector in Israel is dominated, in terms of numbers, by young start-up and early stage companies each with fewer than 20 employees. About 50% of the companies in this sector were established in the past decade and some of the more promising companies are expected to yield impressive results over the next two years.




Produced By: Daniel Uzan Media & Communications