OrbiMed mulls raising second Israel fund

Erez Chimovits, Nissim Darvish, Anat Naschitz

OrbiMed wants to raise $200-250 million, about the same as its first Israel fund, sources inform "Globes."

Leading international biomedical fund OrbiMed is considering raising a second fund in Israel. The group wants to raise $200-250 million, about the same as its first fund, according to documents obtained by "Globes."

Orbimed has not yet begun recruiting investors, but the company has already begun its preparations. Orbimed Israel is managed by Senior Managing Director Dr. Nissim Darvish and managing directors Anat Naschitz and Erez Chimovits, in partnership with OrbiMed International general partners Jonathan Silverstein and Carl Gordon. OrbiMed declined to comment on the report.

OrbiMed's first fund in Israel was founded in the framework of the government biomedical funds, with the support of the Chief Scientist. In this program, the state provided its own investment and limited the risk for the business of funds bringing to Israel experienced international parties, raising more than a minimum amount, and meeting additional rules set by the Office of the Chief Scientist. OrbiMed was the only entity meeting the tender terms in 2010, a time of crisis in the venture capital industry.

The company raised $203 million, double the required minimum. The state invested $48 million in the fund. Since no other government tender is known, it appears that OrbiMed is going to raise the capital without any governmental assistance. This can be regarded as a big success of the Chief Scientist's government funds program. While the program brought only one major venture capital fund to Israel, that fund has seen that establishing a fund in Israel can be profitable, and is continuing to invest, even without support.

Since the first government fund tender was held, the conditions for raising venture capital funds in general have improved, especially in the biomedical field. Note that OrbiMed Israel is also a partner in the Chief Scientist's biotech incubator, in partnership with international companies Johnson and Johnson and Takeda Pharmaceutical.

A young portfolio

According to the figures appearing in OrbiMed's presentation, published in preparation for the beginning of the process of raising an additional fund, the plan is to invest $5-20 million in each of 12-15 companies, the same pattern followed in the first fund. The document displays particulars of the performance of OrbiMed Israel to date. The fund invested $130 million in 19 Israeli companies, in six of which the fund has already achieved a partial or complete exit, and its internal rate of return (IRR) on its investments in Israel stands at 21.4%. Most of the exits were from investments made in Israel before the founding of the special fund for Israel, whose portfolio is still relatively young - less than two years.

The biggest exits were in Given Imaging and SuperDimension. OrbiMed invested $10 million in Given Imaging and made back $68 million over the 13 years in which Given Imaging was a listed company, until it was sold to Covidien in 2013, amounting to a 43.3% IRR. OrbiMed invested $25 million in SuperDimension, and made back $55 million in seven years, a 15.5% IRR. Another exit resulted from investments before the special fund for Israel was founded was in Predix, but the IRR on this investment was minus 5.7%.

OrbiMed Israel has already achieved partial exits in three public companies: RedHill Biopharma Ltd. (Nasdaq: RDHL); TASE: RDHL), BiolineRX Ltd. (Nasdaq: BLRX); TASE:BLRX), and InspireMD Ltd. (Bulletin Board: NPSR). The return on the private companies in which the fund has invested cannot be estimated; these include Keystone Heart, CCAM, Atox Bio, Advanced Inhalation Therapies, RDD Pharma, Treato, Otic, Ornim, Nutrina, Nucleix, Medigus, and Tyto. In all, OrbiMed has invested $129 million in Israeli companies (both by the Israeli fund and before it), leaving $101 million for investment from the Israeli fund, and has received $140 million in cash in return, while the value of the additional investments (for the sake of caution, the private companies are valued according to their value when the investment was made) is $71 million. As for the planned fund, it is being set up for a relatively long 10-year period, with potential for extension. Management fees will be 2.25%.

Published by Globes [online], Israel business news - www.globes-online.com - on April 12, 2015

© Copyright of Globes Publisher Itonut (1983) Ltd. 2015

Erez Chimovits, Nissim Darvish, Anat Naschitz
Erez Chimovits, Nissim Darvish, Anat Naschitz
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