In 2000 Israel's industrial exports climbed by 27% to $20.9 billion.
Of the total, high-tech industries accounted for 44% of all
industrial exports The growth in exports from high-technology
industries contributed 75% to the increase in industrial exports,
according to the "Summary of Israel's Foreign Trade for 2000"
published by the Central Bureau of Statistics.
Pharmaceuticals, by contrast, accounted for only 2.7% of total
industrial exports. Teva Pharmaceuticals (TEVI), as one of the
world's largest genetic drug manufacturers dwarfed all others.
However, the biotechnology group, long promoted as Israel's "next
major area of development" has lagged. After years of disappointment
is it finally ready to emerge from behind the shadow of the booming
telecommunications and software sector?
In May 1998 we focused on this country's biotechnology industry when
we heard a bold prediction: "The next big moving sector in your
country will be biotechnology," stated Daniel J. Schultz, then Senior
Vice President of Lehman Brothers, the prestigious investment
bankers, during a visit to Israel.
We had paid so much attention to the development of Internet related
firms, (nearly to the exclusion of other technology sectors), that we
recalled that it was in November 1994, when the Israel High-Tech &
Investment Report acted as a sponsor of the International Cooperation
for Development of Biotechnology Conference in
Jerusalem. 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.
Privately Mr. Schultz confided, that his prediction was based on the
millions of dollars being invested by Lehman Brothers and others,
into Israeli startups and emerging growth biotech companies.
The recently published Ernst & Young report, cited in this issue
states that "the biotechnology sector in Israel is in a state of
accelerated growth", with nearly 200 startups in 1999-2000. This
report summarizes the life sciences and biotechnology sector. It is
highly upbeat but we have our reservations. Telecommunications and
software which have attracted some of Israel's best human resource
are a perfect fit for the Israeli mentality.
The main characteristics include a flexibility, a boundless energy
which focuses on a short time frame from startup to the market place.
The life sciences require a longer view of minimally four years, and
up to ten years in the instance of a major drug development. Capital
is available but experienced management is in short supply. Life
sciences are in keeping with underlying Israeli ethos of "tikun olam"
(improving the world) but as long as they do not add the magic of
ample financial return, in relatively short time frames and if not
matching but only approaching that of its high-tech brethren they may
once again fall short of the mark.
Capital in the billions, whose flow continued throughout the decade
ending with the arrival of the millennium, positive government
support and what in retrospect was propitious timing, driven by an
aspiring entrepreneurial class were the mix that propelled Israel
into world class status in telecommunications and software. Small
companies achieved critical mass size and were integrated into the
global economy as founders prefered to abandom corporate empire
building and chose to sell out to foreign multi-nationals. It was
followed by a period of regenerating of new companies, a process that
continues until this day.