Novartis AG (NYSE: NVS), the world's biggest pharmaceutical company, recently increased its interest in Israel. For a long time, the company was active in marketing and clinical trials in Israel, and now it is involved in investment as well.
Over the past year, Novartis has invested $35 million in Israel’s Gamida Cell, with an option to acquire it in the future for $165 million, plus royalties, by mid-2016. Novartis also signed a deal with BiolineRX Ltd. (Nasdaq: BLRX); TASE:BLRX), under which BioLineRx will seek and develop Israeli technologies for Novartis. This is a double vote of confidence in the Israeli market: Novartis both recognizes that there is sufficient technology here to justify seeking it, and also believes that Israel’s BioLineRx is suitable for developing these technologies in early stages.
The person directing Novartis’s general strategy is David Epstein, who has served as Novartis Pharmaceuticals Division Head since 2010, directly under Novartis CEO Joseph Jimenez. In effect, Epstein’s activity will in one way or another affect the health of us all, and also Novartis’s access to Israel.
Epstein is an oncologist, and his appointment to lead the pharmaceutical division indicates the company’s growing focus on cancer treatment. During his tenure, the Novartis pharmaceuticals division has taken some important steps, such as acquiring personalized medicine competency, significantly reducing manpower, including in development, and selling its vaccine activity to GSK, while acquiring GSK’s cancer activity, in one of the most creative deals in the pharmaceutical industry.
The Novartis pharmaceuticals division under Epstein is today, according to the company, a focused division, with a promising product pipeline, open access to partnerships, and an appetite for acquisitions, but not for mega-mergers.
"Globes" spoke with Epstein about Novartos's investments in Israel.
Novartis recently made two investments in Israel, following a long period in which no such investments were made. Can you tell us about them?
“We decided to strengthen our ties with young start-ups that have interesting technologies, and when we examined our investment portfolio, it became clear that our exposure to Israel is very limited, despite the fact that there’s a great deal of talent and innovation in Israel. So we invested time in meeting key figures in Israel, and based on this, we have made two deals thus far. The investment in Gamida Cell came from our intention to give strategic priority to developing cell therapy and gene therapy technologies. Gamida has an advanced stem-cell cancer treatment product.
“In addition, we wanted to find a partner that has a deep familiarity with the Israeli market - with the start-ups and with the universities in Israel, and that is why we chose BioLineRx, which has been operating in Israel for a long time, in order to better connect with opportunities in Israel.”
What is your impression of the two investments you have made so far?
“The investments are new. Gamida has advanced a lot since we met, the team is very talented. The partnership with BioLineRx is fresher, but it has a lot of openness and wonderful accessibility. So, all in all, we have had a good start, but we are still in very early stages, particularly with regards to BioLineRx.”
Are there more options on the table?
“Novartis announced that it will carry out targeted acquisitions. In Israel, it will probably be primarily through BioLineRx. Under the terms of the investment in BioLineRx, the company is meant to take the money, identify the Israeli start-ups, and then acquire the rights to develop their technologies. We will be able to buy these technologies from them, if they advance well.
“The key to the success of the Israeli market,” says Epstein, “is its access to the generics market, which can create a lot of value, but it’s important to be diligent about quality control processes. Because, oftentimes, mostly with Indian products, they are not of high enough quality. Just look at the recent scandals in the US surrounding the Indian generics company Ranbaxy and others - it is important to know from whom you are buying. Novartis is the second-largest manufacturer in the world, and we manufacture very high quality products. The largest is, of course, Teva, which is a big advantage for Israel.”
At the annual J.P. Morgan Healthcare Conference, which took place in January, Novartis indicated another area of focus - digital healthcare. The company announced a partnership with Google, under which the Novartis eye-care division, Alcon, will license smart lenses from Google Ventures. Novartis previously founded a digital-healthcare investment fund with chip manufacturer Qualcomm.
Published by Globes [online], Israel business news - www.globes-online.com - on February 15, 2015
© Copyright of Globes Publisher Itonut (1983) Ltd. 2015