One of the strongest investment organizations in Israel’s life science industry is also one of its best kept secrets. Clal Biotechnology Industries Ltd., which manages investments totaling $200 million, has invested in key companies in the life sciences industry. Despite its relative power, its managers avoid appearing in the media. ARTE Arison Technologies president and CEO Ruben Krupik, who also manages Clal Biotechnologies’ investment portfolio, has only been interviewed once since taking up his additional post.
With financial backing from some of the strongest companies in the economy, IDB Holding Corp. Ltd. (TASE:IDBH), and more recently, also Teva Pharmaceutical Industries Ltd. (Nasdaq: TEVA; TASE: TEVA), Clal Biotechnologies can allow itself to do things considered both impossible and inappropriate for the Israeli life sciences industry, such as holding large stakes in its portfolio companies, focusing on a few companies and investing substantial management resources in them; and developing a portfolio with a large preponderance of companies that develop ethical drugs and supporting those companies right through to the clinical trials stage.
The combination of Clal Biotechnologies’ financial strength and long term investment policy, has made it an attractive proposition for entrepreneurs and young companies. Clal Biotechnologies gained even further in strength in 2005, when it added a strategic dimension to its financial capabilities with the entry of Teva, which acquired a 20% share for $19 million. In addition, Teva and Clal Industries and Investments (TASE: CII) undertook to invest a further $30 million in the company.
Cla Biotechnologies’ portfolio includes some of the most talked about companies in the economy. These include MediWound Ltd., which is currently conducting Phase III clinical trials on its treatment for second and third degree burns (in which Clal Biotechnology holds a 74% stake); D-Pharm, which is currently conducting Phase II clinical trials on its treatments for strokes and epilepsy (in which Clal Biotechnology holds a 33%); CureTech Ltd., which is currently conducting Phase II clinical trials for its drugs for the treatment of cancer (in which Clal Biotechnology holds an 86% stake), and which recently signed an investment agreement with Teva; NeuroSurvival Technologies Ltd. (NST), which is developing diagnostic tools for the diagnosis and treatment of cancer (in which Clal Biotechnologies holds 5%), and others.
Clal Biotechnologies has also completed exits in Compugen (Nasdaq: CGEN; TASE: CGEN), which recently floated at a value of $58 million (prior to ARTE taking over the company), and Immuno-Designed Molecules, which was merged in 2005 with the Nasdaq-traded Epimmune. It also closed one company and wrote off another (MTRE Advanced Technologies).
Clal Biotechnologies was founded in 1998 as the life science investment arm of Clal Industries, at a time when IDB was still owned by the Recanati family. The driving forces behind its establishment were Dr. David Haselkorn and Leon Recanati. Clal Biotechnologies faced the risk of closure at the end of the Recanati period, as IDB switched its focus to its core businesses, but was revived following the takeover of IDB by Nochi Dankner, and at the end of 2003, ARTE, with Krupik at its head, took over the management of the company’s assets.
”We were quite apprehensive when we came in, but we had the experience and the lessons we learned with Biomedical,” says Krupik. Biomedical is ARTE and Teva’s joint life science investment arm and was founded by Professor Benad Goldwasser, who joined the ARTE management team four years ago. Biomedical received $30 million in investment and its portfolio contains only five managed companies, all of them impressive: Colbar (which is on the verge of a major exit to Johnson and Johnson); Gamida Cell (considered to be the next big thing in stem cell research in Israel); BioControl Medical (which recently sold part of its activities to AMS, for $50 million, and is continuing development of its product for cardiac arrest), Transpharma Medical, (which recently signed a cooperation agreement worth tens of millions of dollars with Teva) and Remon Medical Technologies. Biomedical also made one substantial exit from XTL Bio, which floated on AIM and is now also traded on Nasdaq. “We have implemented the Biomedical model at Clal Biotechnology, but with a much broader asset and strategy infrastructure,” says Krupik. As joint manager of Clal Biotechnology Industries and Biomedical, together with his partners, Ruben Krupik presides over one of the market’s largest sources of capital for life science ventures.
Globes: How did you come to join ARTE, and through it, Clal Biotechnologies?
Krupik:”I grew up on an agricultural settlement in Argentina. I immigrated to Israel on my own, as a youth, out of Zionism. After completing my military service, I joined Tadiran Communications (TASE: TDCM) and from there I moved on to RDC, a company founded by Rafael Armament Development Authority Ltd. to commercialize its military technologies and adapt them for sale as civilian products. I founded RDC and was one of the first people to believe it was possible. It was a fantastic but nonetheless trying period for me. I had to move a Rafael team from a way of thinking based on the building of the best technology possible to beat the enemy, to a business-based rationale that has to consider budgets, business competition, market preferences and so on. Eventually, the venture took off and became a substantial source of profit for Rafael.
”During the course of my work at RDC, I initiated and managed a portfolio of companies, some of which operated in life science fields (Given Imaging (Nasdaq: GIVN; TASE: GIVN) and Galil Medical. I then moved on to manage the technology business of the Arison Group, which had substantial investments in life science related businesses (e.g Gamida Cell, Colbar. G.W).
Your credit, our headache
What are the main differences in approach between Clal Biotechnologies and other life science funds?
”Despite being in a field that is considered risky, we don’t stick to any specific statistic model. We don’t have small holdings in a lot of companies, so that if any one of them becomes a runaway success, it will cover the losses of the others. We prefer to choose companies with a potential that we strongly believe in, and hold at least a 20% share in them. We support them by way of hands-on management, with the aim of doing whatever we can to ensure the companies’ success.”
Naturally, there still may be companies that don’t succeed, for reasons that are not related to management, meaning clinical failure
”Yes, we too, have closed companies. It is an entirely acceptable part of our model. We also find it relatively easy to do, since our sole consideration is a company’s ability to complete the development of a drug, and not the timing, fund size and scope, impact on future financing rounds, and so on. Our shareholders’ financial and strategic commitment enables us to be more patient over the long term. We believe that, in the end, handling companies the right way is more important than choosing the right company, important as that might be. We used to say at RDC that it’s better to have a great entrepreneur with a fairly good idea, rather than a great idea with a fairly good entrepreneur.
”We have a policy of maintaining hands-on management in our companies’ activities. This doesn’t mean that we oversee both the entrepreneur and CEO on a day-to-day basis. Instead we intervene directly in times of crisis. This is the time when the manager needs your support and your financial resources, and this makes him receptive to your advice. Our message to our managers is, you can take the credit and we’ll deal with the headaches, and that is exactly what we do.”
You have the funds to support companies right through to the end of the development process. Is this your ideology?
”Definitely not. We often stay with a company right through to the end, as we did with MediWound, or make an earlier exit, as we will probably do with CureTech. We try be creative in accordance with the financing and exit terms of each individual company. Either way, we aim to bring in a new partner at the later stages, since aside from the lower financial exposure, this is always a good development for the company. You tend, when preparing a company for due diligence, to look in all directions, and take note of your partner’s opinions and new ideas. This enables you to provide a solid foundation for the company’s scientific and business profile.”
How did the cooperation with Teva come about?
”Teva is interested in a product pipeline. Clal was interested in harnessing Teva’s expertise in the drug industry. The cooperation has enabled a balance between strategic and financial interests. We develop products and then search for the best cooperation opportunities for them, even if they are companies other than Teva. Recently, we agreed several deals with Teva for NST and CureTech.
What are the reciprocal relations between Biomedical and Clal Biotechnologies?
”There are no business ties between the companies, aside from the management company and the fact that Teva is partner in both. The only similarity between the two is the model.”
How much money do you currently have available for investment?
”We have stated in the past that we have $70 million available for investment, but with Teva and Clal as shareholders, we actually have a lot more funds that we can use to invest in any opportunity that we consider worth supporting.”
You usually do not give interviews, and at the request of Dr. Aharon Schwartz, you agreed to give this interview to promote the Biomed Conference due to be held next week. Why is this conference so important to you both?
”This is an event at the highest level with a fascinating agenda, and it will be attended by key industry figures from both Israel and abroad. The initiators of Biomed, especially Dr. Haselkorn and the present management can take great pride in the results of their endeavors. This says a lot about us, our hidden talents, and the future that lies in store for this industry.”
Published by Globes [online], Israel business news - www.globes.co.il - on May 25, 2006
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