Sources inform ''Globes'' that US healthcare investment firm Orbimed Advisors LLC will bid in the tender to establish and operate a government supported biomed fund. The deadline for submitting requests to participate in the tender is March 2.
Orbimed, which manages $5.5 billion and is one the world's largest investment funds, declined to comment on the report.
The funds are a joint initiative of the Ministry of Finance and the Ministry of Industry, Trade and Labor. The government will provide $80-100 million in subsidies for three biomedical investment funds, with the goal of leveraging the investment three-fold with private funding. The goal is to encourage the industry, especially drug development, by overcoming market failures and to encourage Israeli biomedical companies to stay in the country, rather than being sold at an early stage to foreign companies.
Orbimed general partner Jonathan Silverstein has made several trips to Israel recently. He was behind Orbimed's investments in Given Imaging Ltd. (Nasdaq: GIVN; TASE: GIVN), pulmonary endoscope developer superDimension Ltd., obesity treatment developer Galesis Inc. and defunct Epix Pharmaceuticals.
Silverstein met officials from the Ministry of Finances and Ministry of Industry, as well as institutional investors and company executives. He told them that Orbimed plans to set up an office in Israel, which would oversee local activity. Orbimed partners will apparently manage the office, although it will be staffed by local people from Israel's biomedical industry. Orbimed apparently does not intend to partner with Israeli venture capital funds, but will operate alone in the same way as its Indian and Chinese offices operate.
Orbimed's competitors in the biomedical funds tender are not yet known. Medica Venture Partners is one prominent candidate. Medica managing partner Ehud Geller told "Globes" today, "This is a welcome initiative by the government, and we're taking it seriously. We easily meet the threshold conditions. We may cooperate with a foreign fund in the tender, or we may go it alone. There's logic in the government's plan to bring foreign institutions into the venture, but the tender gives them no advantages."
Market sources say that US life sciences merchant bank firm Burrill & Company, headed by CEO G. Steven Burrill is also interested in the tender. Burrill Venture Capital alone manages $1 billion.
Other consortia are currently getting organized. Representatives from almost every biomedical investment firm attended the tender's Q&A meeting. Bidders in the tender must comply with non-competition clauses and may not set up their own funds in Israel at the same time.
Orbimed has a very good chance of winning the tender. It meet all of the tender's threshold conditions, including having invested at least $750 million in life sciences companies to date, a substantial amount of which is in pharmaceutical companies of which at least four have reached the Phase II clinical trial stage of its drugs under development.
Ministry of Finance and Ministry of Industry announced the tender in early 2009, after almost a decade of discussions. During this period, industry sources said that $300 million was needed to create a sustainable and internationally competitive biomedical industry. In the end, the government allocated a third of the amount sought, but hopes to meet the target through private investment from leading international investors.
The biomedical fund's original primary goal was to support late-stage drug development companies in order to create a group of independent Israeli companies that would underpin the industry. The fund's emphasis and conditions changed over time, in response to arguments that market failure did not affect late-stage companies. The conditions were also changed to let the investors in the fund allot a third or more of the money medical devices companies, under certain conditions.
Published by Globes [online], Israel business news - www.globes-online.com - on February 2, 2010
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