Originally created 03/19/01

Biotech startups prosper in Israel



MACCABIM, Israel -- For six months, Nir Dotan's children watched and wondered as their father fiddled night and day in his garage with a little gadget he hoped would give scientists a closer look at how information zips through the human body cell by cell.

A year later, Dotan helped form a biotech startup in this small central Israel town, hired 17 employees and attracted two rounds of financing.

The company, Glycominds, is one of about 150 biotech startups in Israel's sprouting life sciences sector, which raised more than $500 million last year.

"It was very tense in the beginning because you didn't know if it would work or not and you know your resources are limited and you can't afford to make many mistakes," said Dotan, president and chief technology officer of Glycominds.

The company's invention, a miniaturized honeycomb-shaped disk called the GlycoChip, enables scientists to map how proteins interact with sugars -- the telephone switchboard operators of the body that carry information from organ to organ.

The new field the invention is designed to inform is called glycomics.

Information catalogued with the GlycoChip could save pharmaceutical companies hundreds of millions of dollars by helping them evaluate potential drugs before taking them to clinical trials.

The idea is to give drug makers the tools to develop medicines that will travel more efficiently through the body.

Glycominds is among Israeli biotech companies that focus on selling services and tools to bigger pharmaceutical companies to generate revenue that might allow them to later develop products of their own. That approach is enlivening an industry strong on research but has lacked the money to develop products and market them.

For now, though, Israel's biotech industry is still a modest business.

It only represents about $600 million in annual sales, less than 1 percent of Israel's $110 billion gross domestic product, said Adi Alon, director of the Tel Aviv office of the Monitor Co., a Boston-based consulting firm.

"But you have to remember this is a very fast-growing industry worldwide and we think Israel can capitalize on this growth," he said.

Alon believes that within a decade, the industry's sales could reach $3 billion yearly, owing to Israel's strong research and a labor force fed each year by 1,700 graduating biology and medical students.

The recent mapping of the human genetic code -- the genome -- has unleashed a flood of raw data for scientists to unravel.

Israel's life sciences sector raised $238 million in venture capital last year, an increase of 76 percent from the previous year, according to Israel Venture Capital Online, a technology information group. Another $300 million came from investment in public markets, according to Ernst and Young Israel.

Seven Israeli life sciences companies have gone public in the last three years and three are listed on the Nasdaq Stock Market.

Israel's biotech sector is taking on greater importance as other industries, such as tourism and construction, continue to sag after five months of Israel-Palestinian fighting, said David Miron-Wapner, manager of the Tel Aviv office of the U.S.-Israel Science and Technology Commission.

The bulk of Israeli biotech is focused on drug development.

Peptor, a biotech company in Rehovot, just south of Tel Aviv, has developed a drug to treat diabetes that is in the final phases of clinical trials in the United States and could reach the market by 2004.

About five of the 100 biotech drugs on the market are made by Israeli biopharmaceutical companies.

Partnering with multinational pharmaceutical companies, Israeli biotech firms are increasingly working to bring drugs to market, which can take more than a decade.

"There used to be this attitude that 'no, we can't do it. It's too rigorous, too expensive. It can only be done by a German or an American company,"' said David Haselkorn, chief executive of Israel-based Clal Biotechnology Industries Limited, which is investing $140 million in 10 biotech companies, eight of them Israeli.

Haselkorn was hired by Clal two years ago.

Previously, he helped turn Israel's second-oldest biotech concern, Bio-Technology General, one of the world's first profitable biotech companies through the development of a genetically engineered human growth hormone.

The drug, Biotropin, is sold in the United States and is used to treat children with growth deficiencies.

On the Net:

Clal Biotechnology Industries Limited: http://www.clal.co.il/biotech.html

U.S.-Israel Science and Technology Commission: http://www.us-israel.org/jsource/US-Israel/usistc.html