"I have no doubt that the life science field in Israel is very rich, diverse, and successful, but right now local biomed managers are ten years behind the high-tech industry in terms of understanding the market and how to reach it," claims Tim Brosz, managing director of life sciences investment at Chicago-based investment bank InterOcean Financial LLC. Brosz spoke to "Globes" at the end of his first visit to Israel during which he met 25 investment institutions through which he was introduced to 100 companies interested in raising investment through the US bank. InterOcean is represented in Israel by business networking company FreeMind Ltd..
Brosz specializes in finding young companies partners that can help them understand the market and also contribute to their marketing efforts. Naturally, meetings like these also look at ways of raising finance, something that companies like these need more than anything else. "The market for investment in early-stage companies is the first to close at a time of economic crisis and also the last to open," says Brosz. "It usually opens for one to three years and then it closes for five to seven years. So my message to every biomed company is that it should raise whenever, wherever, and as much as it can.
"This apparently does not apply to venture capital funds, since they get their funding from other sources and not the markets. But when things are tough on the market, funds steer clear of new companies. They keep the money for follow-on investments in their existing portfolio companies, because they too will find it harder to raise funds," he adds.
Brosz offers several suggestions for times like these when the primary markets are closed. One, the natural alternative, is a strategic collaboration with industry giants. "The big companies are all hungry for innovation and want new technologies. Most of them have balance sheets that have remained strong, even during times of crisis." According to him, pharmaceutical and biotech companies are now willing to acquire companies at earlier stages than ever. Medical device companies, on the other hand, only acquire more advanced companies.
Brosz has another suggestion, that Israeli biomed managers are less familiar with - raising funds on emerging markets. "Go raise money in China, Brazil, and India," he advises wholeheartedly. "You can raise funds on their stock markets, and you can also raise from the venture capital funds there. True, this is something new, and it's hard to know which parties to approach and how to engage them. You need a bit of help - but the money is there.
"There are also pharmaceutical and medical device companies in the emerging markets, which are looking to invest in innovative products. They are slightly less experienced than the pharmaceutical giants in international marketing, but they can contribute far more than a financial investor can at the strategic level."
Another option for new companies in the US and European markets are investor-manager companies. "Companies like these are looking for untried ventures that can't find a partner and have no money and then, provided they have already carried out successful feasibility trials on humans, they acquire them and manage them together with the current management whom they give shares. I know one such company which operates in the US and Europe and know of several more," says Brosz. He declines to give any names, explaining, "I need to leave myself some work."
"The financial market is constantly innovative. You'll always have new devices entering where there has been a failure," he concludes. "There's money out there - all you need to do is find it."
Published by Globes [online], Israel business news - www.globes-online.com - on September 14, 2008
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