from the September 2017 issue

Medtronic to set up Israeli R&D centers

The medical equipment firm is opening development centers in Jerusalem and Yokneam in cooperation with the Israel Innovation Authority.

Medical equipment company Medtronic will be the first company to establish a development center in Israel in cooperation with the Israel Innovation Authority. In return for hiring 100 employees in spheres beyond the company's existing activity in Israel, the company will receive a $14 million grant from the Innovation Authority. Following approval of the grant in recent days, the new deal between the state and Medtronic is a handshake away.

It is believed that the grant will be spread over three years by paying 30% of the salary of those working in the development center. The new activity will be in two locations: Jerusalem and Yokneam, and will involve brain monitoring (Jerusalem) and big data for medicine (Yokneam).

The expansion of Medtronic's activity in Israel was agreed four months ago in the framework of a meeting between Ministry of Economy and Industry Eli Cohen, Israel Innovation Authority CEO Aharon Aharon, and Medtronic chairman and CEO Omar Ishrak. A senior source in the Ministry of Economy and Industry said today that in addition to a number of contacts at various stages taking place between the state and multinationals interested in investing in the Israeli economy, initial negotiations were also being conducted with a major pharmaceutical company.

The source said, "The background to these companies' interest in investments in Israel involving the opening of development or manufacturing centers is the attractive tax environment in comparison with other countries and the low tax rate on intellectual property."

Other Ministry of Economy and Industry sources said that talks were taking place today with representatives of 10 multinationals for possible investment in Israel. The sources claim that a low media profile is being maintained in these contacts in order to avoid wrecking them.

According to Innovation Authority figures, foreign investment in Israel totaled $12.6 billion in 2016, 7% more than in 2015. The Innovation Authority said that 320 multinationals were operating in Israel.

Investment in companies and partnership in incubators

Medtronic has a deep, long-standing, and extensive connection with the Israeli medical equipment industry. It has 750 employees in Israel out of its 85,000 employees in 65 development centers worldwide.

In addition to its marketing branch, which has been here since 1974, Medtronic has also acquired Israeli medical equipment companies. These companies grew several times over in size in some of these cases, while in others they were closed down or transferred abroad.

The first case was the 2006 acquisition of Odin Medical Technologies, founded by Dr. Amit Goffer, which dealt with MRI imaging for brain surgery. Odin was acquired for a mere $9 million, but it developed and expanded into an important Medtronic development center in Israel. Ventor Technologies, acquired in 2009 for $325 million, had a less happy ending, despite the big plans when it was acquired; it was closed down. The same thing happened to Disk-O-Tech Medical Technologies, which was acquired by Kyphon, a company later acquired by Medtronic. BioControl Medical, in which Medtronic invested large sums, failed in its clinical trials a few years ago, and was also closed down.

In 2014, Medtronic acquired Covidien, which shortly before that went on an acquisition spree in Israel that included superDimension, Oridion Systems, PolyTouch Medical, and Given Imaging at an aggregate price of $1.6 billion. As far as is known, the activities of these companies are still taking place in Israel under the Medtronic umbrella. Medtronic also invested in Itamar Medical, is an investor in many Israeli venture capital funds, and is also a partner in the MindUp incubator in Haifa, which deals in digital medicine. Medtronic currently has a fruitful partnership with Mazor Robotics Ltd. (Nasdaq: MZOR; TASE:MZOR). Medtronic invested over $70 million in Mazor, and became the exclusive distributor of its spinal column systems.

Reprinted from the Israel High-Tech & Investment Report September 2017

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