Israel Life Science Industry Topics Why Israel Why

Israel Life Science Industry

Topics Why Israel? Why Israel Life Sciences? Israel Life Sciences Industry Overview Israel VC Landscape Israel Life Sciences Investments Israel Life Sciences Exits Summary

Why Israel? “Israel’s greatest contribution to the rest of the world is its dissatisfaction. An Israeli cannot be satisfied. So we are always revolutionizing and searching and innovating. It’s in our DNA, ” President Shimon Peres Not Just But Innovation Nation David Tartakover, “A Different Country”, 2004

Israel’s Entrepreneurs “DNA” ü Going global from day one ü Tolerate failures ü Must win attitude ü Solution driven to real problem “Chutzpah” Ambitious Communicative Innovative Aggressive Creative Non Conventional ü Short history – past is not a constrain Independent thinking ü Ability to use limited resources effectively Informal Improvise Vision Experimental

Why Israel ? Israel Academic Strength and Excellence and High Skilled Workforce A combination of an educated human capital with entrepreneurial culture § 1 st in the world in availability of qualified Engineers and Scientists ( IAESI, 2011) § 1 st in quality of academic research by the WEF 2011 -2012 report • 2 nd with 4 universities in the top 30 in computer science • 24% have academic degrees (3 rd after the Netherlands and U. S. ) and 12% hold advanced degrees Scientists and Engineers per 10, 000 Source: Science & Engineering Indicators 2006, US NSF; OCS Cluster Effect – Economic of Scale, Better Information Sharing and Synergies between Companies and Academia

Israel’s Competitive Edge Highest Gross Domestic Expenditure on R&D (2011) 5. 00 4. 50 4. 00 3. 50 3. 00 2. 50 2. 00 1. 50 1. 00 0. 50 M EX C H L SV K G R C PO L TU R ZA F H U N N ZL R U S IT A ES P ES T C ZE PR T LU X C H N N O R IR L C AN G BR N LD SV EU N 27 BE L AU S FR O A EC D IS L AU T D EU U SA C H E D N K JP N KO R SW E FI N IS R 0. 00 Source: OECD Factbook, 2011

Israel’s Competitive Edge Country Rank 1 st 2 nd Business Expenditure on R&D (%GDP) ISRAEL Total Expenditure on R&D (%GDP) ISRAEL Sweden Skilled Labor Entrepreneurship of Managers Flexibility and Adaptability of People Venture Capital Availability 4 th Japan Finland Japan ISRAEL Denmark Iceland Ireland Malaysia ISRAEL Hong Kong Iceland Hong Kong Sweden 3 rd ISRAEL Taiwan Hong Kong Malaysia ISRAEL Brazil Taiwan Source: IMD world competitiveness report 2011 Utility Patents per Million Rank Country/Economy 1 2 3 4 5 Company Spending on R&D Score Taiwan Japan United States Israel Korea Rank 287. 1 279. 1 261. 7 195. 0 181. 4 Capacity of Innovation Rank Country/Economy Score 1 2 3 4 5 Sweden Switzerland Japan Germany Finland 6. 0 5. 9 5. 7 5. 4 6 United States 5. 4 7 8 9 10 11 Denmark Singapore Taiwan Luxembourg 5. 2 5. 0 4. 8 4. 7 1 2 3 4 Germany Japan Sweden Switzerland 5. 9 5. 8 5. 7 5 Finland 5. 6 Quality of Scientific Research Institutions 6 7 8 9 United States 5. 3 5. 1 4. 9 Rank Israel France Denmark Israel Country/Economy 1 2 3 4 5 Israel Switzerland UK United States Sweden Score 6. 2 6. 0 5. 9 Global Competitiveness Report 2010 -11 WEF

Israel is a global leader in research and innovation Quality of Scientific Research Israel Level of innovation Source: World Economic Forum, 2011 Source: Economist Intelligence Unit, 2009 2 nd largest innovation hub world wide

Why Israel ? Healthy Thriving Economy - performing well during continuous global crises Inflation (%) 5. 00 4. 00 3. 4 3. 8 3. 91 2. 66 2. 00 2. 18 1. 00 0. 00 2007 2008 2009 2010 $ 89. 00 $ 85. 00 $ 70. 00 5 2008 5. 4 2009 2010 2011 GDP Real Growth Rate (%) 5. 4 4. 7 4. 8 2010 2011 4 3 2 $ 71. 20 $ 70. 40 $ 65. 00 1 0 $ 60. 00 2007 6. 6 6. 1 4 $ 81. 80 7. 5 7. 3 6 $ 90. 00 $ 80. 40 Unemployment Rate % 2007 2011 Export($B) $ 80. 00 8 7 6 5 4 3 2 1 0 2008 2009 2010 2011 2007 2008 0. 700000001 2009 Standard & Poor’s upgraded Israel’s credit rating to A+ reconfirmed 9/2012 quoting: “prosperous and resilient economy, strong institutions, ongoing fiscal consolidation, and robust external performance " Source: Israel Central Bureau of Statistics (ICBS), Israel Economic Department

Government & Institutional Incentives § Office of the Chief Scientist - shares up to 50% of R&D expenses; Bi-national R&D funds with many countries § The Global Enterprise R&D Cooperation Framework (IBM, Oracle, P&G etc. ) § Worldwide taxation treaties and free trade agreements § Tax exemption for venture capital investment § Israeli institutional investors – the state will participate in the risk (200 M NIS) § Incentives for early stage investments o The Law for the Encouragement of Capital Investments: • Competitive grant program; Tax exemption path for manufacturing facilities o The Law for the Encouragement of Industrial R&D

High-Tech is Israel's Economic Catalyst § $71 B mobilized through the high-tech sector over the last decade (20022011): § $15 B in venture capital investing § $40 B in sale of Israeli high-tech companies § $16 B in IPOs and acquisitions of Israeli high-tech companies § Massive state tax income from sales of high-tech companies § 15% of GDP, 41% of industrial export (Q 3 -4 2012 -51%!) § Major source of employment with ~250, 000 employees (10. 2% of the workforce) § plus contribution to satellite industries - services, real estate, etc.

Why Israel and Why Life Science? § Life-Sciences represented about 50% of all academic research funding activities in its 7 universities, 10 research institutes and 5 medical schools and many cutting edge medical centers § Israel has one of the world’s highest per capita ratios of scientists in life sciences, one out of every three Israeli scientists specialized in life sciences § Israel ranks as a top country for scientific publications per capita, almost 60% of its publications are in Life Sciences 6 Nobel prize winners in the last decade, 4 of them in Chemistry Profs’ Daniel Shechtman, Ada Yonath, Aaron Ciechanover and Avram Hershko Publications in leading LS Journals* per capita Nature, Science, The Cell*

Why Israel and Why Life Science? § Israel’s scientists and engineers have integrated advanced technologies in electronics, communications, electro optics, Lasers, IT and others to develop cutting –edge medical devices § Commercialization of defense - related technologies § Israeli entrepreneurs overcome technological barriers and solve development problems quicker and at capital efficiency compare to their larger and more affluent competitors overseas § Presence of Global Multinational R&D Centers Optics- Missile guidance systems - Tracking Missiles & Radar Technologies – Navigation, Cryotherapy, Diagnostic kits

Israel Life Science Industry - Patents Medical patents/capita -1 st Bio. Pharma patents/capita – 4 th Source: www. uspto. gov

Government & Institutional Incentives to the Life Sciences Sector § Chief Scientists grants ($106. 2 M in 2012, 25% of total) § Technology incubators (Medical device 39%, Biotechnology 19% (of total # companies) § § 12 out of 24 incubators invest in Life Science companies Bi-National funds, Federal grants (NIH), EU Framework, Marketing Grants Government Initiated Biotech Fund - $222 M Orbimed Israel Fund Kamin program of OCS, Bridging the gap between applied research and the industry, financing 85% of approved applied research for up to 2 years, 100 Biomed projects approved, 60% of the total budget § Chief Scientists program to expand presence of multinational Biomed R&D centers in Israel

Israel’s Life Science Industry: 2003 -2012 A Decade of Growth 33% of all Life Science companies in Israel today are less than 5 years old , 67% are less than 10 years old Cumulative Number of companies: 2003 -2012 Number of companies established 2003 -2012 • From 309 companies in 2003 to more than 900 companies in 2012 • On Average About 40 -75 Life Sciences Companies are Established Each Year Source: IVC, IATI Data Bases & assumptions

Life Science Industry -Fast Growing Industry Young, Creative, & Innovative Industry Number of Companies and Number of Employees Source: IATI Data Base - 2012

Life Science Industry -Fast Growing Industry Young, Creative, & Innovative Industry Sectors Ø 15 Active Stem Cell Companies, One in Phase III Ø Israel is a world leader in the utilization of IT for healthcare purposes Source: IATI Data Base - 2012

Life Science Industry -Fast Growing Industry Young, Creative, & Innovative Industry Companies’ Developmental Stage Main Medical Fields • Majority of revenue generating companies are in the Medical Device Sector • In 2011, life sciences export reached $8. 9 B Source: IATI 2012

Companies’ Developmental Stage The Highest number of Life Sciences Companies in Advanced Clinical Trials Ever! 112 120 100 80 64 60 40 40 21 20 34 15 0 Pre-Clinical Medical Devices Pre-Clinical Biotechnology > 70 drugs in advanced clinical trials Source: IATI 2012 Pre-Clinical Pharmaceuticals

Israeli Life Science Breakthrough Innovations Ingested Capsules for GI Diagnostic (Given Imaging) Imaging Coronary stents (Medinol) Generic Drugs (Teva) Wireless Implants for CHF Monitoring (Remon Medical) Mapping and Navigation for Electrophysiology (Bio. Sense a J&J Company) Electromagnetic Navigation Bronchoscope (Super. Dimension) Medical Lasers & Aesthetic Systems (Lumenis, Syneron, Inolase, Alma) MRI, CT, NM (Elscint – GE, Philips, Picker) Cryotherapy (Galil medical) MRI Guided non-invasive surgical procedure (Insightec) Transcatheter Aortic Valve Replacement Systems (PVT, Ventor) Restoration Device to Paralyzed People (Argo)

Israeli Originated Bio. Pharma Blockbuster Launched Products Company Name Drug Disease Johnson & Johnson/ Schering Doxil Cancer Kaposi's Sarcoma/Ovarian Serono Rebif MS Gonal F Infertility Merck- Serono BMS Erbitux Cancer Teva Copaxon Multiple Sclerosis Teva Azilect Parkinson Novartis Exelon Alzheimer's Protalix Bio. Therapeutics Elelyso Goucher’s disease Revenues of > 7 B

Capital Raised by Israeli High-Tech Companies ($m) 2003 -2012 10 years: $15. 7 billion Israeli Funds: $5. 8 billion, 37% of total Foreign and Others: $10 billion, 63% of total “Considering the needs of the industry, and the fact that the capital available to local VC funds should stretch over the next four years, the gap between supply and demand is clear – the Israeli VC industry is about a billion dollars short”. IVC-KPMG Survey of Israeli VC Fund Raising, 2/28/2012

Capital Raised by Israeli Life Sciences Companies ($m) By Year By Quarter # of companies PharmaBiotech Medical Device $409 M “Considering the needs of the industry, and the fact that the capital available to local VC funds should stretch over the next four years, the gap between supply and demand is clear – the Israeli VC industry is about a billion dollars short”. IVC-KPMG Survey of Israeli VC Fund Raising, 2/28/2012

Capital Raised by Israeli Life Science Companies (VC Funding) Decrease in Venture Capital Funding! (Only 15% of Funding in 2012) *Venture capital-backed tech companies (in which at least one investor in a funding round is an Israeli venture capital fund) PWC, Israel, Q 4 2012 Money. Tree* Report

Capital Raised by Israeli High-Tech Companies by Stage (%)) All companies Life Sciences companies Late Mid Early Seed

Capital Raised by Israeli High-Tech Companies by Sector (%)

~60 Israeli companies listed on NASDAQ #2 only to China as “non US companies” in NASDAQ 160 140 120 100 80 60 40 20 0 China Israel Canada Netherland Ireland United Kingdom Australia Almost 60 life sciences companies went public at TASE Argentina

Israeli Life Sciences companies Exits - M&A (Increased in the last 5 years) Company Acquirer Year Amount($M) Sector Orex Medcon MSQ Colbar Disc-O-Tech Sightline Biocontrol(Urology) Predix Remon Medical NESS Neuroscience Inolase Ester Neuroscience Taro Versamed Mediguide Omrix Alpha Biotech Ventor Optonol Labcoat Starlims Medingo Cadent Radiancy Super. Dimension Oridion Polytouch Kodak Mc. Kessen Orion Lasers J&J Kyphon Stryker AMS Epix Boston Scientific Bioness Candela Amarin Sun Pharma GE St Jude J&J Nobel Biocare Medtronic Elcon Boston Scientific Abbot Roche Align Technology Photo. Medix Covidien 2005 2006 2006 2007 2007 2008 2009 2010 2011 2012 62. 5 105 40 159 240 150 50 125 80 75 16. 5 32 454 42 300 438 95 325 160 100 123 160 190 175 350 346 40 Medical Imaging Health IT Medical device Aesthetics Medical Device Biotechnology Medical Device Medical Devuce Aesthetics Pharma Medical Device Medical Imaging Biotechnology Dental Medical Device Health IT Medical Device Aesthetics Medical Device

Israeli Life Sciences companies Exits Source: The Pw. C Israel 2012 Hi-Tech Exit Report

Exit data Life Science Companies 2003 -2012 - M&A and IPO Excluding Syneron and Exits below $10 M Israel: All Companies – M&A, IPO 160 US Venture Backed Companies – M&A 151. 4 140 120 100 80 60 40 32. 1 12. 3 20 0 Average Exit Investment to ($M) Exit ($M) 11 8 Average Time Multiple to Exit From Inception (Y) 1 st Round (Y) Life Science Venture Backed M&A 2005 -2011 - Average time to exit from first investment: Biotech average: >7 Y Medical Device average > 8. 5 Y (Only 4 medical device exits less than 5 Y)

Israel Life Sciences Sector, Summary – An opportunity! Ø Growing community of quality and ambitious entrepreneurs Rafi Benary Gabi Meron Ø Emergence of seed ecosystem micro funds and angels Ø Maturity of the sector, multiple companies in advanced clinical trials Ø Increasing # of Second Timers, Top Notch Entrepreneurs Angels Less than $400 M available for investments! Ø Minimal involvement of foreign life sciences VCs and corporate

Ingredients for Success Seasoned VC Community University Medical, Science Students and Postgraduates Leading Academic Institutions & Research Defense Technology Spillover Immigration Global Life Science Firms Veterans Innovative & Entrepreneurial Culture Availability of Human Capital Existing Successful Life science Technology Companies Infrastructure Corporate R&D Technological Incubators Strong Government Support Hospitals and Medical Centers