The Israel Innovation Authority (formerly the Office of the Chief Scientist) has announced that it will provide a NIS 120 million grant to two international medical devices companies and one international digital health company for expanding their business in Israel.
Medtronic, which has a number of development centers in Israel based on companies that it acquired, will receive a NIS 50 million grant for establishing new high-risk activity in Israel.
GE Healthcare, which has a development and production center in Israel for imaging systems, will also receive NIS 50 million to bring new activity in CT scanners to Israel, initially with an emphasis on development and later with Israeli manufacturing activity with high added value.
Change Healthcare, formerly McKesson, which will bring activity to Israel in additional sectors and will search for cooperative ventures in Israel in artificial intelligence, will receive NIS 20 million. Change Healthcare, one of the leading medical information systems companies, acquired Medcon, which operates in the subsector of cardiological information systems.
All of the companies will have to provide at least double the amount of the state grants for the activities being subsidized. The NIS 100 million that GE Healthcare and Medtronic receive will come from the Innovation Authority's budget, while the NIS 20 million to be received by Change Healthcare will come from the budget of the national plan for supporting the digital health sector.
According to Innovation Authority growth division head Sagi Dagan, the company were awarded these grants after a competitive process that began last November. This grant was defined as a pilot; if successful, additional grants of this type may be made in the future, although there is no such concrete plan at the moment.
The presence of international companies in Israel is frequently mentioned as one of the important elements in construction of a stable and prosperous medical ecosystem. The biggest lack is the presence of international drug companies, which at best function as franchise holders of technology incubators (except for Lonza, which recently founded a small development center in Haifa, and Teva Pharmaceutical Industries Ltd. (NYSE: TEVA; TASE: TEVA), of course). Medical devices, companies, on the other hand, are active in Israel, including all of those that receive the grant. Nevertheless, the grants will expand those companies' activity and create a better connection between them and the ecosystem of Israeli medical companies.
Dagan says, "GE, for example, is likely to immediately expand its activity and make Israel one its leading worldwide focuses in nuclear medicine. They also employ production subcontractors.
"A company like Change Healthcare, one of the first signs of the digital health program, provides interfaces to many companies into computers systems of health systems all over the world. Change Healthcare is a leading company in health systems. Connecting with it is a little like connecting with Microsoft in the 1990s. It is a very special company, because you see in its offices not just the software people, but also the product managers and marketing people specializing in medicine. This merger between understanding of the medical world and understanding of the software world is exactly what we are looking for in digital health software."
"Globes": Will these companies also receive tax benefits like the international software companies operating in Israel?
Dagan: "This is an interesting point, because in contrast to software companies, which work on a cost-plus model, meaning that their intellectual property isn't registered in Israel, the companies in our plan are supposed to register intellectual property in Israel according to the plan, and they will therefore pay tax much closer to what an Israeli company pays."
Change Healthcare Israel site leader and executive director of product management Omer Schalit Cohen says, "We became aware of this grant program just in time during the big visit to Israel by Change Healthcare's management. Up until now, the company operated the development center in Israel, but was not very open to the ecosystems of Israeli startups. Thanks to this grant, the company has begun to take an interest in more extensive activity in Israel. I think that the effect is really of the grant and this program more than a general interest in Israel or the national digital program, which is being expressed through the grant. The fact that there was a tender here with a specific time and a great deal of profit to be made contributed to the company's decision to say, 'Let's go for it.'"
According to Cohen, what is special about Change Healthcare in digital health is that its systems control the medical information throughout the value chain: with private doctors, clinics, hospitals, insurance companies, and so on throughout many areas, on both the clinical side (including managing information from laboratory tests and imaging systems) and the administrative and financial side of the health system (management of supply and payments). "We're starting to also develop artificial intelligence capabilities for analyzing all of this information, but we'll also be interested in cooperating with companies that can offer us additional artificial intelligence capabilities."
Medtronic Israel country director Yaron Itzhair said, "We're delighted to cooperate with the Israel Innovation Center. Medtronics' development centers in Israel provide us with access to the best brains and the most dedicated and professional professionals in the Israeli health industry."
GE Healthcare VP molecular imaging Nathan Hermony explains, "Up until now, GE Healthcare's activity in Israel has focused primarily on nuclear medicine, a $500 million market for imaging devices, not including components and service. Now we're trying to get into PET - a $750 million market in devices. This activity will move from Milwaukee in the US to Israel, and there's no doubt that this grant is part of the reason. The entire molecular imaging field will now be incorporated in Israel."
Hermony notes that GE Healthcare's activity in Israel will also expand into a sphere called Theranostics - therapy combined with diagnostics in real time, for example imaging of the process of giving a drug for a malignant tumor in the middle of the treatment in order to see its immediate effect and adapt the next injection. "If we succeed in developing this activity in Israel, we'll be able to increase our target market even more." GE Healthcare currently has 200 employees in Israel and the plan is to hire at least 50 more as soon as the PET activity is moved to Israel, and probably even more later. "There's a lot of excitement in the company about this move," he says.
Will you be more open to startups and the local medical system?
Hermony: "We recently began cooperating with Ichilov Hospital in order to develop artificial intelligence capabilities for analyzing the information from our imaging systems. This cooperation has already begun in any case, but artificial intelligence is an entire world in itself. Now we'll be able to greatly expand this cooperation."
The current chief scientist at the Ministry of Economy and Industry, Ami Appelbaum, serves as chairman of the Israel Innovation Authority.
Published by Globes [online], Israel business news - www.globes-online.com - on July 17, 2018
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