Arkin, Phoenix set up $60m biomed investment fund

Mori Arkin

The joint fund is a unique investment model for an Israeli investment institution in the biomed sector.

The Phoenix Holdings Ltd. (TASE: PHOE1;PHOE5) and Arkin Holdings, the Arkin family's investment company for pharma and biotech, are jointly establishing a $60 million fund for investing in these sectors. The financial partnership is Phoenix-49%, Arkin Holdings-51% (Arkin Holdings will be the professional partner). The agreement includes an option for a future increase in the investment.

This is a unique investment model for an Israeli investment institution in the biomed sector - cooperation with a company having expertise in the field. Investment institutions in Israel are currently interested in exposure to the biomed industry, which has produced extremely impressive returns in recent years, but those institutions often feel that they lack the expertise needed to select the right companies for investment, especially when companies in the early stages are involved.

Investment institutions usually make their investments through venture capital funds specializing in the life sciences or general funds, and also through hedge funds and indices.

The current model enables Phoenix to assume a unique position in the sector, with investment in early-stage companies (this is the stage at which most of the value in successful companies accumulates), but without having to build in-house expertise in the field.

Phoenix said, "The current model facilitates a partnership with a high level of common interest. In most of the investments by groups like ours in venture capital funds, the institutions are the investors, while the fund is only the manager. In this model, both parties make almost the same investment."

The investment involved is relatively large, compared with the amounts that Phoenix has invested in private pharma companies to date. Phoenix executive VP and chief investment manager Roy Yakir said, "We believe that Arkin Holdings' great experience and reputation in recent year as an investor specializing in the pharma industry will help us increase our exposure to the sector with an attractive return-risk profile."

Phoenix investment funds manager Elad Givoni led the investment on behalf of Phoenix. Arkin, managed by Nir Arkin, is Israel's leading life sciences investment group.

Founded by Mori Arkin, former CEO and cofounder of Agis Industries, sold to Perrigo Company (NYSE:PRGO; TASE:PRGO) for over $800 million, Arkin Holdings has been making strategic investments in private pharma companies in recent years. Among other things, the group invested in cancer treatment company cCam, sold in July 2015 to global company Merck in a deal worth over $600 million. Other investments were in Metabomed, Urogen, Quiet Therapeutics, and BioSight.

Arkin Holdings pharma division head Dr. Pini Orbach will also manage investments for the current venture. He explained that the partnership would be an opportunity to leverage the company's know-how and expertise for larger investments, and would make it possible to grab a better control position in companies and support investment in young companies at earlier stages.

"There were other parties interested in investing with us, but we think that a partnership with a group like Phoenix gives us all the capabilities and meets all of our needs, while the involvement of others could make this too complicated a group," Orbach wrote.

Under the agreement, any subsequent investment by Arkin Holdings in the biopharm sector will be through the partnership. The partnership will not invest in companies in which Arkin Holdings has already invested in the past, but Arkin Holdings can continue supporting these companies by itself.

The current model is reminiscent of Migdal Insurance and Financial Holdings Ltd. (TASE: MGDL)'s activity in the medical equipment sector with Accelmed, managed by Dr. Uri Geiger. Mori Arkin is also a leading partner in Accelmend. In contrast to the current venture, Accelmed has a variety of partners, but Arkin and Migdal are the largest. Arkin Holdings is also a partner in the Sphera hedge fund, which invests in public biomed companies. The current venture will invest mainly in Israeli companies, but not exclusively so. Most of the investments will be in early stage companies.

Arkin Holdings founder Mori Arkin said, "We are very glad about the cooperation with Phoenix, one of Israel's largest investment institutions, and regard it as a first-rate financial and strategic partner. The joint platform we have created is an important milestone in Arkin Holdings' pharma business."

Published by Globes [online], Israel business news - www.globes-online.com - on June 14, 2016

© Copyright of Globes Publisher Itonut (1983) Ltd. 2016

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