Sources inform ''Globes'' that just two finalists are left in the race to receive government funding to set up a biomedical fund: OrbiMed Advisors LLC and Medica Venture Partner. Expedio, the joint venture of San Francisco-based Bay City Capital and the team from 7Health Ventures , headed by Dalia Megiddo Limor Sandach, and Amir Zaidman, did not meet the interim criteria of the tender. Tamar Howson, an expatriate Israeli who has held executive positions in the global biomed industry, was due to join Expedio.
Expedio declined to comment on the report. Bay City Capital was unavailable for comment.
The three venture capital funds in the biomed tender were asked to submit letters of intent from potential investors by mid-October. The letters were to demonstrate the funds' ability to raise the minimum amount of money - $74 million by April 2011.
Bay City Capital, which was responsible for raising most of the capital for Expedio, was unable to show enough letters of intent by the deadline, so the tender committee decided a few days ago to disqualify it.
Medica and Orbimed both met the interim terms, but there is no assurance that their letters of intent will materialize as actual investments. Sources close to Orbimed previously said that it had a good chance of raising at least the minimum required capital. The fact that Medica also succeeded in submitting enough letters of intent is a good indication that Orbimed will meet its commitment.
The tender terms stipulate that if only one fund is a finalist, the government has the right to increase its support for that fund.
7 Health Venture, Megiddo’s previous fund, does not make any new investments, but only follow-on investments. Expedio was supposed to be her primary activity. It is possible that the partnership with Bay City Capital will continue, and Expedio will try to raise another fund without government financing; otherwise, the Israeli team will have to review its options. Bay City Capital venture partner Charles Hsu is responsible for Israeli operations.
The biomed funds venture is intended to greatly boost investment in biomed companies in general and in drug development companies particular. The objective is to prevent the sale of new companies at too low a price, and to bring in top international investors who have not yet operated in Israel.
Optimistic biomed industry sources say that a focused investment of a few hundred million dollars by the government in the industry will lead to the creation of large companies, which would enable the Israeli biomed industry to develop and compete on a global scale without additional government support.
The call for an investment of $300 million in biomed to create a sustainable domestic industry has been made for a decade. Five years ago, Chief Scientist Eli Opper announced plans to turn the words into deeds, and the tender for the biomed funds was launched two years ago.
Although the government has not proposed investment of the amount requested, it agreed to invest up to NIS 300 million to support private investors and to match private investment at a 1:3 ratio. It is hoped that this support will bring in private money to reach the hoped for amount.
Most venture capital funds that have invested in biomed companies have done so alongside investment in other industries, and have not made large investments in biomed in years. As for funds specializing in biomed, most are old funds and it is unclear whether they can raise new money.
If only one fund is a finalist in the tender, the total amount available for investment, including government support, will be $100-150 million - well below the amount claimed as necessary to create a sustainable Israeli biomed industry.
Published by Globes [online], Israel business news - www.globes-online.com - on December 1, 2010
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