"It is by no means simple these days to keep the development centers of the large international corporations in Israel, and the events currently taking place in Israel make this task even more difficult," says Ori Hadomi, who led medical device company Mazor Robotics from its inception until its sale to global medical technology concern Medtronic for $1.64 billion in 2018. Hadomi made these remarks to "Globes" in an interview that took place after his speech at a protest against the judicial reform in Haifa.
Medtronic is the largest medical device company in the world today, traded on the New York Stock Exchange at a $112 billion market cap.
Development centers of international corporations in Israel are one of the main factors in the prosperity of the country's technology sector. In software and communications, all the leading companies maintain centers in Israel. In the medical devices sector, there are several leading centers with extensive connections to the local innovation community. For example, Medtronic, Philips, GE Healthcare, and Johnson & Johnson maintain centers in Israel employing hundreds of people, establish incubators, support startups, collaborate with them, and occasionally even acquire them. Medtronic is an especially active purchaser, having acquired over ten Israeli companies.
In contrast to medical equipment, there are very few development centers in Israel of international pharmaceuticals companies (Merck-Serono, Perrigo, and Lonza). Recently, however, recently several companies have established centers that focus on developing digital tools for drug development, including GSK and Verily, a subsidiary of Google. Other companies have also begun investing in technology incubators in Israel. Any such additional activity in Israel is met with enthusiasm and considered critical for the local industry, but launching it is no easy task.
"It's difficult to keep development centers in Israel for many reasons," says Hadomi. "The cost of employment, operations, competition with other regions of the world that offer incentives and support. There are academic institutions here with excellent reputations at the moment, but that is eroding, and above all - global economic changes have led international companies to pay less for ideas and more for finished products. Israel is good at ideas, but less so at scale-up.
"When successful scale-up finally happens, and a product makes the difficult trek to market, and catches the attention of a company like Medtronic, as happened with Mazor, or Cathworks, with which Medtronic recently signed a marketing agreement with an option to purchase - this only happens thanks to the formation of a broad network of cooperation between the young company with different entities abroad: academic institutions, investors, distributors."
"There are almost no development centers in China, and for good reason"
Given this situation, Hadomi says, "The political developments taking place are simply a mess. We constantly need to explain to investors and partners why it’s still worth their while to operate in Israel, despite it all. How can we explain to them that it’s worthwhile investing in a country with an unstable legal system, politicized decision-making, and a budgetary system that is entirely political and unclear about whether it favors the technological sector? This is anything but a following wind."
In the context of academic relationships, Hadomi emphasizes that, "the academic world is based on international ties, and academics are usually the first to withdraw in response to political processes. We will see Israeli scientists leave and not come back, while, at the same time, the status of the local academic institutions will deteriorate - the two processes will feed off of each other."
He notes that international companies today are committed to policies of sustainability, ethics, and social issues. "They speak of diversity, fairness, and equality; these values are seen as essential," he stresses. "They will not want their products coming from a country where these things are no longer part of its vision.
"You can say to me 'What about China? What about Singapore?' and the answer is that these countries have academic relationships with the world, and China has manufacturing plants, but hardly any development centers, and that’s no accident, I think. In these environments we don't see international collaborations on innovation."
"The ability to develop and create dwindles in an aggressive environment"
Hadomi’s words were even harsher at the Haifa demonstration. "Mazor operates in the field of minimally invasive surgery, healing patients without destroying the surrounding area," he said. "This is based on an understanding that the human body is a complex and intricate system of structures, connectors, tissues, and equilibriums. Treatment without detailed planning, taking all these things into account and the inter-relationships between the various parts of the body can cause irreparable damage, even total collapse.
"The government chose to act invasively and take unrestrained political power over mechanisms that are supposed to be independent, over systems that are essential for the existence of a civil, democratic, balanced, and healthy societal fabric."
Like several other entrepreneurs whom "Globes" has interviewed, Hadomi emphasizes that innovation is created in a secure regulatory environment that is also characterized by a sense of freedom. "The ability to develop and create rests on the basic ability to think and act freely," he says. "It becomes possible in an environment of diverse opinions, where the rights of the individual are guaranteed and protected. It dwindles in a violent and aggressive environment, and is rare when times are troubled. The actions promoted by this government are designed to reduce freedom and threaten our fundamental rights as citizens."
"The prime minister can stop this process"
Hadomi was clear about where his speech was directed: "This government is very powerful; it is capable, and primarily the person at its head is capable, of both stopping the process and also rebuilding. I am confident that there is room for compromise, for dialogue - if it is sincere. If it is manipulative, then no. My impression was that the president spoke from the heart, with sincerity and understanding. I am not willing to be so pessimistic as to say, 'There’s no chance.'
"The key to this entire process is in the hands of the prime minister. I don’t expect it from Rothman [Constitution, Law and Justice Committee chairperson MK Simcha Rothman - G.W.], nor from the minister of justice, and I’m not expecting anyone to 'get off their high horse.' I don't think they can. The only one who can climb down, who perhaps because of existential fears and attempts to evade justice is not doing so, is the prime minister. I really hope that the prime minister does not want to leave behind him a legacy of destruction of the state and this society. He doesn’t deserve that, and nor do we."
Published by Globes, Israel business news - en.globes.co.il - on February 27, 2023.
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