A German cartographer in the 16th century created a magnificent map of the world, with Jerusalem at its
center. To us who live and work here Jerusalem, as is the rest of Israel, is not only the spiritual vortex of
the world but the city and the country are the world's most advanced and only partially tapped frontiers and
wellsprings of technology. There is in this country a vibrancy which reminds us that Israel, as we move
towards the millennium, is an exciting place to live in. It is this excitement that keeps us fascinated and
actively reporting on the scene.
Not too many years ago visiting foreign experts, when addressing local conferences, devoted a scant few
hours attending the conferences, delivering a paper and explaining to young companies how they should go
about raising initial, second round financing and finally, to turn to Wall Street for an initial public offering.
In those years he visiting experts found little business of interest and this allowed them time to tour
Jerusalem, enjoy the gourmet cooking of Tel- Aviv restaurants and visit archaeological sites in Tiberias,
next to the Sea of Galilee and close to where Jesus reputedly delivered the Sermon on the Mount. We, and
other veterans of the local scene, had become inveterate technology conference buffs! But, we began to
stop coming because of the prevailing attitude of the presenters, who persisted in prescribing their formula
for success.
Well, the situation has changed drastically. Either the Israelis have learned a lot from the presenters
or perhaps they had more to offer to the world than was realized. The result is that there are more than 100
Israeli companies publicly listed in the US. Some of these companies have become major successes in
developing, producing and marketing great products. Some of the founders have amassed substantial
personal net worth.
A conference held in Tel-Aviv early in May, and sponsored by Blumberg Capital from San Francisco, the
YBF Group and Ha'aretz, Israel's quality Hebrew language daily, was a testament as to how far we have
progressed. The Israeli conference attendees were no longer being told that they musts learn how to raise
finance, or study how to present themselves to venture capitalists and investment bankers. The presenters
switched from one-time polite pointers to participants, on how to "succeed in the world outside of Israel",
to reminding us of their role and contribution, enabling the success of CheckPoint , NetXchange,
Radguard, Evergreen Canada Israel, just to mention a few companies. We agree with the foreign sponsors
of the Conference. They were not exaggerating. David Blumberg, founder of the San Francisco Blumberg
Capital based firm which provides investment and consulting services to the information and technology
sector, was correct in reminding us that he was a contributing player in the development of Israel's
phenomenal success .... Check Point Software. That firm captured investors with its rapid rowth and
unique technology and even attracted the attention of small company predators such as Microsoft. Mr.
Blumberg is "sold" on Israel and finds time to study Hebrew to better relate to Israeli clients who are
seeking major rewards reserved for capable suppliers of technology solutions to the booming technology
information market. Silicon Valley Bank's Larry Lopez, Senior Vice President International Strategic
Partnerships preached the gospel that "you don't need to sell shares of your company to raise capital, since
equity capital is the most expensive capital you will ever raise."
The Israeli Ami Segal the soft-spoken president of the YBF Group based in Ramat Gan was more reserved.
He emphasized Israel's growing technology and global expansion. Early in life we learned that using a
crystal ball for guessing the future, is as hazardous occupation. No less so than picking which will be the
future dominant Internet company from among the many young companies of today.
Our interest heightened when we heard a bold prediction: "The next big moving sector in your country will
be biotechnology," stated Daniel J. Schultz, Senior Vice President of Lehman Brothers, prestigious
investment bankers whose name has appeared more and more frequently on Israeli public financing
offerings.
We had paid so much attention to the development of Internet related firms, (nearly to the exclusion of other
technology sectors), that we realized that it was as far back as November 1994, when the Israel High-Tech
& Investment Report acted as a sponsor of the International Cooperation for Development of Biotechnology
Conference in Jerusalem, that we had published our last in-depth overview of the Israel biotechnology
industry. At the time we prematurely believed that the young group of Israeli biotechnology firms were on
the threshold of producing a new Chiron or Genetech. For the past three-and-a-half years venture capital
funds have been the main source of financing the biotechnology sector.
Mr Schultz have certainly opened our eyes. More than 30 Israeli biotech companies and research
institutions are participating in thecurrent 4th annual Alliance Program in New York. Sponsored by the US-
Israel Science & Technology Commission (USISTC), Alliance '98 is an integral part of the Biotechnology
Industry Organization (BIO) International Meeting, which is expected to attract over 3,200 leaders from the
biotech and pharmaceutical industries. The goal of the Alliance program is to catalyze the formation of
strategic alliances between the growing biotechnology industries of both U.S. and Israel. "With Alliance '98
we are virtually delivering the entire Israeli biotech industry to the U.S., providing Israeli firms a four day
opportunity to showcase their technologies and meet with prospective partners in an efficient and effective
setting" says Dr. Haim Hardt, President of the U.S.-Israel Biotech Council, organizers of Alliance '98.
If Wall Street is turning more positive on biotech, the window of opportunity may be about to open for
Israeli companies. Israeli companies that have attracted significant venture capital include: Peptor, backed
with more than $25 million from major investors, including the Walden Group, Rothschild Asset
Management, the Biotechnology Investment Group and executives at the country's two largest
pharmaceutical companies. Peptor uses combinatorial chemistry, on of the hottest scientific areas in the US,
as well as computer design technologies to generate libraries of SCAPLs (Small Cyclic Analogs of Peptide
Loops ) for targeted diseases. It has already formed alliances with Ares-Serono, Teva , Xoma, Neoprobe,
and Mallinckrodt.
Compugen, has raised more than $8.5 million from investors that include Apax-Leumi Partners,
Oppenheimer & Co., U.S. Venture Partners and Israel Seed Partners. The company has developed a
bioinformatics platform which includes a powerful search engine aimed at isolating drug leads from the
massive gnomic data banks. Compugen products have been installed at companies and institutions that
include Merck, SmithKline Beecham, Eli Lilly, Bayer and the Sanger Center.
D-Pharm, which we featured in our Report three years ago, started from a small grant of seed money
provided by the Israeli government in 1993. Since then the company has attracted more than $8 million in
private funding. The company is developing anti-epileptic, neuro-protective and other drugs using its
Selective Molecular Activation and Routing technologies (SMARt). The SMARt technologies activate and
route drugs to therapeutic targets by utilizing the body's natural biological systems. Earlier this month D-
Pharm obtained a Notice of Allowability from the U.S. Patent and Trademark Office for novel prodrugs of
valproic acid with enhanced penetration into cells. Animal studies suggest that these drugs will offer
improved treatment for epilepsy and other neurological conditions.
XTL Biopharmaceuticals, meanwhile, has attracted more than $3 million worth of investment from the
Rothschild Asset Management Group and a group of Israeli investment funds including Medica, Inventech
and Nitzanim. The company develops biopharmaceuticals utilizing its proprietary "Trimera" system-a
mouse containing human tissue that enables the development of fully human therapeutic monoclonal
antibodies and also enables drug candidates to be screened for efficacy against viral, oncological and
autoimmune diseases. A hepatitis B drug based on this technology will enter Phase I and II trials in 1998.
XTL has strategic alliances with Canada's Biochem Pharma Inc. and Neoprobe. Many of Israel's emerging
biotech companies expect 1998 to be the year when they achieve major strategic alliances. Some major
milestones in recent years were Copaxone a "blockbuster" drug by Teva, and a couple of encouraging
approvals by the FDA obtained by Pharmos after six years of work. Today there are some 100
biotechnology companies operating in Israel as compared to 63 in 1994. Many of these, as we have stated,
are relatively well financed to carry out their missions. It would take only the announcement of several
FDA approvals to bring global attention to Israel's biotechnology efforts.