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Israeli life sciences in rosy health with $5.2b in exports

With mass layoffs hitting Israeli high-tech hard in recent months, it was cheering to get a rosy report on the health of its life sciences sector at the MIXiii Health-Tech.IL conference in Jerusalem on November 10.

Conference organizer Israel Advanced Technology Industries (IATI) shared findings from its 2021 report with approximately 1,000 conference attendees from 30 countries. (“MIXiii” stands for the mix of health and technology, combined with Israel, international and innovation.)

Highlights were presented by the report’s lead author, Omer Gavish, partner in PwC Israel and head of its Pharmaceutical and Life Sciences division.

Israeli life sciences in rosy health with $5.2b in exports
Omer Gavish presents the 2021 IATI Life Sciences Industry Report at MIXiii in Jerusalem, November 10, 2022. Photo courtesy of PwC

Gavish said there are about 1,800 active life sciences companies in Israel, 80 percent of which were founded in the past decade.

“That’s an enormous number, and it’s about the same in 2022,” he said. “The majority, more than 60%, are at an early stage.”

About $3.8 billion in investment dollars flowed into private Israeli life sciences companies in 2021, of which $1.5 billion was invested in the last quarter alone. Digital health companies received $1.5 billion of the total, a 300% increase over 2020.

Foreign investments are increasing

Gavish noted that $1 billion came from domestic investors, while foreign investors doubled their investments from 2020. This trend toward foreign investment continued in the first nine months of 2022.

Among publicly traded Israeli life sciences companies, 2021 was the first year in which they surpassed $1 billion raised on the various US stock exchanges.

“US stock markets have been and continue to be a significant source of funding for life science companies in Israel,” Gavish said.

“Over the past decade, 21 Israeli life sciences companies have raised more than $6 billion in the US stock markets, mostly on NASDAQ. More than 50% of this amount has been raised in the past four years,” although the trend has slowed in 2022.

Nine life science companies raised $209 million on the Tel Aviv Stock Exchange (TASE) in 2021, a record for the past decade.

Record year for life sciences

The approximately $5 billion invested in private and public Israeli life sciences companies represents a 44% increase compared to 2020.

“It’s been another record year for the industry,” Gavish said. “This is the first year that total investment has crossed the $5 billion mark, more than double what we had in 2019, which itself was a great year.”

Israeli life sciences in rosy health with $5.2b in exports
Chart of capital raised by Israeli life science firms since 2012. Photo by Abigail Leichman

Average deal size also set a record of $13.7 million per deal. TASE-listed life sciences companies had an average deal size of around $23 million, the highest in the past decade.

“As we predicted last year, the increase in investment – which started with the Covid-19 pandemic period and continued through most of 2021 – was mostly in digital health and medical devices subsectors,” he said.

Gavish said about $1.7 billion was invested in life science companies in the first nine months of 2022.

“This amount is higher than most years in the last decade despite a decrease compared to the corresponding period in 2021.”

However, he added: “Toward the end of 2021, we experienced a decline in the capital markets. This trend continues in 2022 and has affected not only the number of public investments, but also the total investments in life science companies.”

Exports are booming

Exports of Israeli life science products are booming, reports Gavish. These products are mainly medical devices and pharmaceuticals.

Total pharmaceutical exports in 2021 were equal to $2.1 billion, an increase of 23% compared to 2020. Total exports of medical devices added up to $3.1 billion in 2021, about 20% more than in 2020.

According to figures for the first half of 2022, it appears that the rise will continue.

Pharma exports during that first half totaled $1.5 billion, an increase of 50% compared to the corresponding period in 2021; and medical device exports totaled $1.6 billion compared to $1.5 billion in the corresponding six months in 2021.

Keep your eye on digital health

While the majority of Israeli life science companies over the past decade have been in medical devices, Gavish noted that “in the last two or three years, we see a steady decline in the number of those companies, or at least their share.”

Digital health is the fastest growing sector.

“This is the third year that we have seen an increase in the number of digital health companies, especially as a result of Covid-19. And you see that trend continuing this year for established and seed companies,” Gavish said.

The digital health boom is also affecting the geographic distribution of Israeli life sciences companies.

Device and pharmaceutical companies tend to be located in Jerusalem, Rehovot, Ness Tziona and Haifa, close to hospitals, universities and research institutions such as the Weizmann Institute and the Technion.

But digital health companies are choosing the common high-tech hub in Tel Aviv.

Gavish explained that digital health companies are less connected to research institutions and hospitals; they are technology companies looking to compete outside the traditional life sciences sphere.

Wellbeing emphasizes the rise

In addition to digital health, the IATI report identifies four niche sectors with significant growth potential in the coming years: wellness, food technology, climate technology and artificial intelligence (AI).

These sectors are known for their innovation, rapid growth and attractiveness to investors.

“I think what’s interesting in a qualitative way, not necessarily a quantitative way, is that wellness and food technology is increasing,” Gavish said.

“Both of them are related to the quality of life, to be more preventive in approach and not just to not find solutions for the care of patients after they are sick.”

What is the forecast?

“Even though we see the market not doing well in 2022, even though funding is not doing so well, there is substance in this industry and the future looks good,” Gavish said.

Data from the first half of 2022 regarding Israel’s life sciences sector, he added, “is much better than the first half of 2021, even though the markets are not [doing] also.”

Israeli life sciences in rosy health with $5.2b in exports
Karin Mayer Rubinstein, CEO and President of IATI, and PwC partner Omer Gavish. Photo courtesy of Omer Gavish

Karin Mayer Rubinstein, CEO and President of IATI, summarized: “In recent years, the life science and health technology industries have become major engines of growth for the Israeli economy. Our latest research highlights the need for further support and investment so that Israeli companies can continue to create significant social impact.”

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