Healthcare investment firm a href="http://www.orbimed.com/en" target="new">OrbiMed announced Monday the closing of its second Israel-focused venture capital fund with $307 million in capital commitments. Investors in the fund include several of the world’s largest healthcare companies and dozens of institutional investors and family offices.
The first Israel-focused OrbiMed fund closed in 2011 with $222 million in capital commitments. It was launched with the cooperation of the Israeli government through the Office of the Chief Scientist, as part of a tender for bio-med government funds, which OrbiMed was awarded. The government supported the fund with a $40 million investment and financial guarantees.
The new fund was raised without any government assistance. The fund will be managed again by Dr. Nissim Darvish, Anat Naschitz, and Erez Chimovits from Israel and Jonathan Silverstein and Carl Gordon, who manage private equity operations for OrbiMed.
What drew investors to the second fund?
Darvish: “The first fund already had a number of exits, led by oncology drug development company cCam sold to Merck in a deal worth up to $605 million (of which $95 million was paid at signing). That one deal can pay the initial investment on the fund. We also realized gains on some companies we invested on the market, and several up rounds.”
Silverstein: “This is the largest ever life sciences fund raised in Israel. Our investors love for the local team and other partners we recruited to be involved in the Israeli fund, like Steve Squinto who was the founder of Alexion and who we integrated on the board of three of our Israeli companies or Kevin Koch, who was an executive at Biogen. We also recruited, as a venture partner, Israeli expat Dr. Ronny Ginor, who sold Becker & Associates Consulting a few years ago.”
A more veteran venture partner at OrbiMed Israel is Prof. Aya Jakobovits, an Israeli living in the US who founded several successful oncology startups.
Darvish: “Our investors are aware of the Israeli capabilities in medicine. They know significant developments in immunotherapy came from Israeli researchers, and that Israel is hosting work in genetic therapy and engineering which is the epicenter of new drug development. There is also a lot of interest in the FutuRX incubator we founded with the support of the Chief Scientist, for investment in later-stage projects, and with Takeda Pharmaceutical Company and Johnson & Johnson.”
Silverstein: “I give the Israeli government enormous credit because we could not have raised the first fund without them; but now the market is ripe for Israel.”
The venture capital market recovered in the time between the two funds.
Silverstein: “Absolutely. The market was tough during the first fund. When we started recruiting for the current fund six months ago, the situation was much better, but it has since dipped a bit.”
Several other Israeli biomed funds took the opportunity to raise more investments including Accelmed, Triventures, and Vitalife.
Is there a chance the other funds who competed with you at the time for the government tender will now invest in Israel?
Silverstein: “I would be glad if that happened, both as a Zionist and as someone seeking quality partners for investments in Israel. In recent years, the foreign VC funds lessened their involvement here, and the vacuum was quickly filled by the corporate funds. I would like to see both these agents working here. The main thing missing from Israeli companies is money. In the past it was said they were lacking in management, but that situation has improved greatly.”
In what other areas is the fund interested?
Darvish: “Beyond genetic therapy and engineering, we are interested in digital health, cardiology, robotics, neuromodulation, tele-medicine; in the pharmaceutical arena we are still looking at oncology, brain, orphan drugs, the liver, and maybe ophthalmology if we find the right product.
“We love to say we are indifferent to the stage of investment we have companies in stage 3 of clinical trials and we also have the companies in our accelerator. We have companies that specialize in one field like Atox Bio.”
Silverstein: “We are also indifferent to certain hitches, say if a company in an interesting field was missing a manager in a particular department we can take care of that, we know how to find people all over the world.”
In the past, you invested in both private and public companies including some trading on the Tel Aviv Stock Exchange.
Silverstein: “We are still open to investing in companies trading on the Tel Aviv exchange. The fact their trading volume is low, and they are likely trading at a discount compared to the value they might have on the Nasdaq, it could actually work in our favor.”
The fund will invest in 20 companies and also work in tandem with the private equity operations of the global company. OrbiMed has $15 billion in assets under management. It has offices in New York, San Francisco, Mumbai, and Shanghai. The Israel office in is Herzliya.
Published by Globes [online], Israel business news - www.globes-online.com - on May 24, 2016
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