Back when Teva Pharmaceutical Industries Ltd. (NYSE: TEVA; TASE: TEVA) was a real power in the innovative Israeli pharma industry, investing in many startups, there were quite a few complaints against it. While companies like Alcobra, Gamida Cell, MediWound Ltd, (Nasdaq: MDWD), CureTech, and others were glad to get financing from Teva or achieve cooperation with a strategic concern with Teva's help in the relatively early stages, there were also complaints in the industry about Teva's domination throttling them and keeping out other large companies.
Whether or not these complaints were justified, Teva gave up most of its investments in Israel in 2012, leaving it open for investments by other companies and to financing through venture capital funds and Nasdaq. Since then, quite a few parties have asked Teva to invest more in local companies, but the company maintained a low level of investments; any investments were primarily in academic ventures.
A year ago, Teva bestowed a "gift" of a different kind on the local industry. The large wave of layoffs at Teva released thousands of experienced employees onto the market. Teva always made sure its development teams and future managers were trained at other drug companies in Israel, except for those trained overseas of who worked in earlier startups - a frequent occurrence in recent years.
Nevertheless, the market previously benefited less from this training, because the high salaries, good conditions, and stability at Teva kept personal turnover at the company low. From time to time, workers who left Teva founded new startups, such as Dr. Ehud Marom, who founded two companies (one of which will compete directly against Copaxone, Teva's leading drug), but the wave of layoffs accelerated the process. The crisis at Teva not only led to the laying off of senior executives; it also made many of them rethink their plans and realize that the startup they always dreamed of was not necessarily riskier than staying at a company whose future was unclear in 2017. It is possible that the Israeli pharma industry will thank Teva for the crisis that overtook the company.
Two such prominent companies are, 89Bio and Clexio, but in addition to these, which are the most serious founded by former Teva employees, and are also among the most intriguing companies of all the new Israeli pharma startups, people who left Teva in the past year or two are also working on several other new ventures. For example, Liat Primor, whose last job at Teva was products portfolio manager, recently founded FeelBetter with two partners. The company has not yet been unveiled, because its product and strategy are still in the early planning stage, but FeelBetter plans to improve the composition of drugs for patients with the patients themselves being involved in the process.
Another example is former Teva VP and head of early stage clinical development Iris Grossman. She was mentioned in a story on the "Bloomberg" business website as being involved in the founding of a big data for drugs company in Haifa, while simultaneously being in a new job at a medical startup in Boston.
It appears that this is merely the tip of the iceberg. It is a definite possibility that other employees at Teva are founding new companies, or will do so in the future. Even if they do not found companies themselves, they are likely to join companies that were founded and bring them capabilities that can only be learned in a large pharma company.
89Bio: A huge market searching for a treatment for fatty liver
Founders: head of R&D Dr. Michal Ayalon and COO and chief business officer Ram Waisbourd
CEO: Rohan Palekar
Product: treatment of inflammation resulting from non-alcoholic steatohepatitis
Initial financing round: $60 million
In addition having been founded by former senior executives at Teva, it also took one of the products developed in Teva's innovative products division when the cutbacks threatened continuation of its development. The product is for treatment of inflammation resulting from non-alcoholic steatohepatitis (NASH).
Based on the product and the team's know-how, 89Bio raised $60 million in its first financing round - one of the largest first financing rounds ever in Israel, which is more appropriate for the amount of money raised by pharma companies with breakthrough technologies in the US. Leading the round was Orbimed Israel, together with Orbimed US, Pontifax, and US funds Longitude Capital and RA Capital Management. CEO Rohan Palekar is a former CEO of US company Avanir Pharmaceuticals, which brought two drugs to market and was sold for $3.5 billion in 2015.
"The fact that the team already worked on this product in a large drug company was very attractive to me, and was one of the reasons why I came to the company," Palekar says. "In addition to the fact that the company was founded by ex-Teva personnel, we still have a connection with Teva that enables us to ask questions and get information from the company."
The innovative molecule on which the company is based came to Teva from one of its acquisitions, but was not part of its core activity. In the process of the strategic focus introduced by Teva in 2012, Teva decided to focus its innovative activity on neurology, cancer, and women's health. Nevertheless, Teva did not completely abandon the NASH project. Certain resources were allocated to the innovative products team at Teva, headed by Prof. Michael Hayden, for development of the product. Hayden is now a director at 89Bio.
89Bio's founders are head of R&D Dr. Michal Ayalon and COO and chief business officer Ram Waisbourd, who spent nine years at Teva in jobs such as VP strategy and transformation in Teva's R&D department and planning and operations manager in the company's business development office. 89Bio's official location is in the US, but its entire development will take place in Israel.
"The fatty liver market is one of the biggest in the medical field. There is no drug solution whatsoever for it," says Palekar. 16 million people in the US alone have fatty liver, meaning that they have some degree of scarring in the liver. Scarring affects liver function and is liable to eventually lead to cancer. "The problem is common and known not just in the US, and we see that it cannot be treated merely by recommending a change in lifestyle," he says.
The product recently entered Phase I trials on human beings. "We previously did trials on all sorts of animals, and even though we have not yet presented results, we definitely feel that the program looks good," Palekar declares.
Since the potential market is large and there is still no solution for it, companies dealing in fatty liver already accompanied by scarring are being sold for large sums in the early development stages. For example, Nimbus was acquired by Gilead for $400 million as an advance, with the possibility of much more money later (at least $200 million more has already been paid) for a product that was about to enter Phase II trials. Gilead also acquired a product at the same stage from Phenex for $470 million as an advance and additional large sums later. Intercept Pharmaceuticals (Nasdaq: ICPT) which has already reached an advanced stage of trials, has a $2.6 billion market cap, even though the performance of its product is questionable.
Clexio Biosciences: combining drugs with new delivery methods
Founders: CEO Elisabeth Kogan and CTO Menashe Levy
Products: treatment of pain, depression, and central nervous system diseases
Cooperation: Dexcel Pharma (formerly Dexxon)
Ra'anana-based Clexio was founded eight months ago as a cooperative venture between former Teva employees and pharmaceutical company Dexcel (formerly Dexxon), a leading generics drug company in Israel that has not received much media attention. In recent years, Dexcel has been developing innovative products.
Clexio CEO Elisabeth Kogan is former Teva head of NTE (products combining an existing molecule with new delivery systems or combinations). Before that, she served in various drug development management positions in the company, where she worked for over 15 years, and also at drug company Sanofi.
Kogan founded Clexio together with CTO Menashe Levy, who was VP technology in Teva's global R&D department. Like Kogan, Levy also dealt with new drug delivery methods and combinations of drugs.
Kogan says that Clexio, which still operates under the radar (and if it depends on Dexcel, Clexio will remain there for a long time), already has 26 employees, many of them from Teva.
In its public reports, the company states that it has six products for treatment of pain, depression, and other diseases of the central nervous system, and that is uses a combination of unique drugs and new delivery technologies. Kogan confirmed by e-mail that some of the products, which were acquired from Teva's research and development division, are at a preclinical stage, while others are in Phase I.
Beit Berl program: Retraining Teva chemists as teachers
An initiative in another direction, which is likely to have a major impact on the drug industry in the slightly more distant future, is training chemistry teachers from the industry in the framework of Beit Berl College and the chemistry supervision department in the Ministry of Education.
Dr. Tami Yaron, who heads this Beit Berl retraining program, says, "This program was integrated with an existing program for training academics for chemistry teaching. There is a shortage of good teachers in all subjects, but the shortage in chemistry is particularly severe."
Published by Globes, Israel business news - en.globes.co.il - on November 25, 2018
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