With Israeli high-tech seeing massive layoffs over the past few months, it was excited to receive a glowing report on the health of its life-sciences sector on November 10 at the MIXiii Health-Tech.IL conference in Jerusalem.
The organizer of the conference, Israel Advanced Technology Industries (IATI), shared the findings of its 2021 report with nearly 1,000 conference attendees from 30 countries. (“MIXiii” stands for Mixture of Health and Tech, combined with Israel, International, and Innovation.)
Highlights were presented by the report’s lead author, Omer Gavish, partner at PwC Israel and head of its Pharmaceuticals and Life Sciences division.
Gavish said there are about 1,800 active life-sciences companies in Israel, 80 percent of which were founded in the last decade.
“It’s a huge number, and it’s the same in 2022,” he said. “Most, more than 60%, are in the early stages.”
About $3.8 billion in investment is set to flow into private Israeli life-sciences companies in 2021, of which $1.5 billion was invested in the last quarter alone. Digital health companies received a total of $1.5 billion, up 300% from 2020.
Foreign investment has increased
Gavish said $1 billion came from local investors, while foreign investors doubled their investments from 2020. This trend towards foreign investment continued in the first nine months of 2022.
Among publicly traded Israeli life-sciences companies, 2021 marked the first year in which they exceeded $1 billion raised on various US stock exchanges.
“The US stock markets were, and will remain, an important source of funding for life-sciences companies in Israel,” Gavish said.
“Over the past decade, 21 Israeli life science companies raised more than $6 billion in US stock markets, mostly on the NASDAQ. More than 50% of this amount was raised in the last four years,” though the trend is set to slow down in 2022.
Nine life-sciences companies raised $209 million on the Tel Aviv Stock Exchange (TASE) in 2021, a record for the past decade.
Record year for life sciences
Nearly $5 billion in investment in private and public Israeli life sciences companies represents a 44% increase over 2020.
“It was another record year for the industry,” Gavish said. “This is the first year that total investment has passed the $5 billion mark, which is more than double what we had in 2019, which was a great year in itself.”
Average deal size also set a record of $13.7 million per deal. TASE-listed life-sciences companies saw an average deal size of around $23 million, the highest in the last decade.
“As we predicted last year, the increase in investment – which began with the period of the COVID-19 pandemic and continued through most of 2021 – was mostly in the digital health and medical device sub-sectors,” he said.
About $1.7 billion was invested in life-sciences companies in the first nine months of 2022, Gavish said.
“This amount is higher than most years in the last decade, despite a decrease compared to the same period in 2021.”
However, he added, “By the end of 2021 we experienced a downturn in the capital markets. This trend continues in 2022 as well and impacts not only the number of public investments, but also the total investment in life science companies.”
Gavish pointed out that exports of Israeli life science products are booming. These products are mainly medical devices and pharmaceuticals.
Total pharmaceutical exports to equal $2.1 billion in 2021, an increase of 23% compared to 2020. Total medical device exports increased to $3.1 billion in 2021, up nearly 20% from 2020.
Going by the figures for the first half of 2022, it looks like the growth will continue.
Pharma exports totaled $1.5 billion during that first half, up 50% from the same period in 2021; And medical equipment exports are set to reach $1.6 billion in 2021, compared to $1.5 billion in the same six months.
Keep track of your digital health
While the majority of Israeli life-sciences companies over the past decade have been in medical devices, Gavish said that “over the past two or three years, we see a steady decrease in the number of those companies, or at least in their share.”
Digital health is the sector that is growing the fastest.
“This is the third year we see an increase in the number of digital health companies, especially due to COVID-19. And you see that trend continue this year for both established and seed companies,” Gavish said.
The digital health boom is also affecting the geographic spread of Israeli life-sciences companies.
Device and pharma companies are located in Jerusalem, Rehovot, Nes Tziona and Haifa near hospitals, universities and research institutes such as the Weizmann Institute and Technion.
But digital health companies are choosing the typical high-tech hub in Tel Aviv.
Gavish explained that digital health companies are less tied to research institutes and hospitals; They are technology companies that want to compete outside the traditional life-sciences sector.
welfare emphasis on growth
In addition to digital health, the IATI report identifies four niche sectors with significant growth potential in the coming years: wellness, food tech, climate tech and artificial intelligence (AI).
These sectors are known for their innovation, rapid growth and attractiveness for investors.
“I think what’s interesting in a qualitative way, not necessarily in a quantitative way, is that wellness and food technology are on the rise,” Gavish said.
“Both of these relate to quality of life, to being more preventive in approach and not just finding solutions to care for patients once they become ill.”
What is forecast?
“Even though we see the market not doing well in 2022, even if the funding is not doing well, there is strength in this industry and the future is looking good,” Gavish said.
Data about Israel’s life-sciences sector for the first half of 2022, he said, is “much better than the first half of 2021, even though markets are not [doing] Too.”
IATI CEO and President Karin Mayer Rubinstein summarized, “In recent years, the life science and health technology industries have become key engines of growth for the Israeli economy. Our latest research highlights the need for further support and investment So that Israeli companies can continue to create significant social impact.