Jerusalem Institute for Israel Studies

Milken Innovation Center

NEW MODELS FOR BIOMEDICAL INNOVATION AND

COMMERCIALIZATION
T
AF
DR

FINANCIAL INNOVATIONS LAB

March 16, 2015

Jerusalem Institute for Israel Studies

Milken Innovation Center
Agenda
Objectives Jerusalem Institute for Israel Studies
Milken Innovation Center

How do we bridge the gap between the potential from life

sciences inventions and the availability of financing?
How to create platforms (organization, management, financing,
and strategic partnerships) that will leverage smart money to
invest in life sciences business based in Israel?
How to support and encourage the life sciences sector so that
there are sustainable companies?

2
Agenda
Next Steps for Israeli Life Sciences Jerusalem Institute for Israel Studies

Development PolicyFraming the Question Milken Innovation Center

1. What are the gaps in available finance products and platforms for
investors? (e.g. assets classes)
2. Are there still gaps in terms of reaching various Israeli institutional
and overseas investors?
3. What lessons can we learn from philanthropic and social investing
to create the financial tools needed in the life sciences market?
4. What are the requisite steps for Israel to form global strategic
partnerships to leverage life sciences opportunities?

3
Agenda
New Financial and Business Models Jerusalem Institute for Israel Studies

International Perspectives Milken Innovation Center

Can we structure a portfolio of early stage/translational research

projects for structuring a long-term financial facility for
commercialization?
Can we identify other capital gaps to bridge drug development,
diagnostic, delivery problems within and between later stages of
development as well?
Can we develop business models to facilitate de-risking in
conjunction with these investment products supported by science
and technology development policy and programs?

4
Agenda
Working Groups on Financial and Jerusalem Institute for Israel Studies

Business Model Alternatives Milken Innovation Center

What are the policy recommendations to implement the new

financial and business models?
How can government, institutional investors and philanthropies
align through a structure financial product to accelerate cures for
chronic and infectious diseases?
What are the next steps to move both the financial and business
model toward implementation?
Who needs to be engaged to move these actions forward?

5
 Jerusalem Institute for Israel Studies
Milken Innovation Center

Industry Context
GLOBAL AND ISRAEL TRENDS
Current Global Business Model for Life Sciences
R&D is Flawed Jerusalem Institute for Israel Studies
Milken Innovation Center

The productivity of big pharmaceuticals has declined in recent

years
Their stock-price performance over the past decade has been
dismal an annualized return of 1.2%
Life sciences venture-capital investments have not fared much
better, with an average internal rate of return of 1%.
However, FDA approvals are on the rise

Source: Fernandez, Stein and Lo, 2012; Pmlive 7

Global market climate are creating a financing
opportunity Jerusalem Institute for Israel Studies
Milken Innovation Center

Declining real prescription-drug spending

Rising drug-development costs and shrinking R&D budgets
The patent cliff of 2012 during which several blockbuster patents
will expire; increased public-policy and regulatory uncertainty
The economic consequences of healthcare reform;
Less funding, risk tolerance and patience among venture
capitalists; (2014 saw improvements in venture capital financing)
Narrow and unpredictable windows of opportunity for conducting
successful initial public-equity offerings; stock market volatility
Source: Fernandez, Stein and Lo, 2012; Biotech Gate, 8
2015
Global investors Interests are leading us to
find innovate solutions Jerusalem Institute for Israel Studies
Milken Innovation Center

Private equity may afford more latitude for risk taking and
deferred exits, but the scale of capital commitment is
considerably smaller
Funding decisions are often driven less by scientific
breakthroughs than by business cycles and windows for
conducting initial public-equity offerings.

Source: Fernandez, Stein and Lo, 2012 9

 Israel Produces an Extraordinary Mass of
Innovative Life Sciences Inventions Jerusalem Institute for Israel Studies
Milken Innovation Center

Nobel prizes: Ciechanover and Hershko, Shechtman, Yonath

Blockbusters originated in Israeli inventions: Copaxone,
Exelon, Doxil, Rebif, GonalF
Stem cell research excellence
World 2nd in Life Sciences academic publications per capita
World leader in medical device patents per capita

Publications in Leading Life Sciences journals per capita (Nature, Science, The Cell)

0.48

0.29
0.26

0.16 0.14

US Israel UK Canada Germany

Source: www.uspto.gov; Analysis by IATI

Source: IATI, 2013, Ministry of Economy 10
Industry: development stages Jerusalem Institute for Israel Studies
Milken Innovation Center

Development Stage of companies (2013)

Revenue
38%

Clinical
25%

Seed Pre-clinical
14% 13% Other
9%

Source: IATI, 2013

11
Industry: by sectors Jerusalem Institute for Israel Studies
Milken Innovation Center

Number of life sciences firms by sector - 2013

Health IT; 7%

Biotechnology; 17%
Medical devices; 61%
Agbiotch; 2%
Services; 1%
Pharma; 11%

Other; 1%

Source: IATI, 2013

12
Industry: Biotech subsector Jerusalem Institute for Israel Studies
Milken Innovation Center

Biotech companies, 2013

Research equipment
Bioinformatics 7%
4%
Gene therapy & molecular biology
Other 3%
18% Diagnostics
Naturals
8% 10%
Antibody, vaccines
14% Pharmaceuticals
Tissue engineering & cell therapy
15%
21%

Source: IATI, 2013

13
Industry: Pharma subsector Jerusalem Institute for Israel Studies
Milken Innovation Center

Pharma companies - 2013

Natural materials
9%
Generic drugs New chemical entity
11% 15%
Others
Drug discovery
19%
18%
Chemicals
Drug delivery 7%
18% Diagnostics kits
3%

Source: IATI, 2013

14
Industry: Medical devices Jerusalem Institute for Israel Studies
Milken Innovation Center

Medical Device Companies - 2013

Other; 4%
Monitoring; 7% Diagnostic; 13%

Medical Equipment; 21%

Disposable & Implantable; 42%

Imaging; 8%
Drug Delivery; 4%
Source: IATI, 2013
15
Life sciences companies stages by subsector Jerusalem Institute for Israel Studies
Milken Innovation Center

Life sciences firms in development stages , 2013

100

90
87
80

70

60

50

40
38
30
31
20 22
21
10
11
0

Source: IATI database, 2013, Dan Kaufman 16

 OCS Financial Support for Life Sciences Jerusalem Institute for Israel Studies
Milken Innovation Center

OCS Funding for Life Sciences 2005-2013 OCS Funding by Sector (2013)
600

500 Biotechnology; 10% Electronics; 10%

Electro-optics; 6%
400
Medical Devices; 16% Chemistry; 4%
300
Pharma; 3% Software; 16%
200 Plastics; 2%
Cleantech; 7%
100
Various; 6%
0 Telecommunications; 22%
2005 2006 2007 2008 2009 2010 2011 2012 2013
Pharma Devices Biotechnology

Source: OCS, 2014

17
Public Equity: Nasdaq and TASE Jerusalem Institute for Israel Studies
Milken Innovation Center

NASDAQ/NYSE/AMEX Life sciences market capitalization on NASDAQ, NYSE, and AMEX, March 2015

Life Sciences companies on: 23

Taro Pharmaceutical Industries Ltd.; 11%
Life Sciences Market Cap: $58.1 Billion
($9.8 Billion w/o TEVA) Teva Pharmaceutical Industries Limited; 83%

TASE Market capitalization on TASE (000 $)

March 2015
Life Sciences companies: 56
Overall Market Cap: $9.1 Billion
Compugen; 5%
Opko; 68%

18
Life sciences firm listings in equities
markets Jerusalem Institute for Israel Studies
Milken Innovation Center

NASDAQ/NYSE/AMEX LISTINGS TEL AVIV STOCK EXCHANGE LISTINGS

Company Market Capitalization ($000)
Teva Pharmaceutical Industries
Company Market capitalization (000 $)
Limited 48,181,874
Opko 6,441,237
Taro Pharmaceutical Industries
Ltd. 6,503,263 Even in the US equities Compugen 433,319
272,655
Syneron Medical Ltd.
Lumenis Ltd.
437,099
409,154
market, Israeli life ' 255,472
Compugen Ltd. 407,238 sciences stocks are not

232,461
187,892
Mazor Robotics Ltd. 257,551
Pluristem Therapeutics, Inc. 227,806 building outstanding 182,630
155,152
NeuroDerm Ltd.
ReWalk Robotics Ltd
224,700
190,459
value 147,963
Protalix BioTherapeutics, Inc. 175,168 144,912
Kamada Ltd. 171,910 141,285
Alcobra Ltd. 156,927 106,706
MACROCURE LTD. 151,078 89,309
Redhill Biopharma Ltd. 124,795 52,982
Bio Blast Pharma Ltd. 100,894 52,067
Galmed Pharmaceuticals Ltd. 95,297 40,750
w/o TEVA ABOUT
Vascular Biogenics Ltd. 74,819 38,848
Oramed Pharmaceuticals Inc. 47,449 THE SAME MARKET 36,612
Rosetta Genomics Ltd. 39,404 CAPITALIZATION IN
Can-Fite Biopharma Ltd 38,986 LIFE SCIENCES 34,714
XTL Biopharmaceuticals Ltd. 28,064 31,417
InspireMD, Inc. 12,296 29,508
Check-Cap Ltd. -
9,107,890
19
9,874,360
Snapshot: market performance Jerusalem Institute for Israel Studies
Milken Innovation Center

Public equities in Israeli life sciences companies may not be the best way to create and build
sustainable value

Israeli biomed companies trading in the United States had an

average negative return of 19% in 2014, compared with
growth of around 23% for U.S. health care sector indexes
overall and about 26% for the biomedicine and
20
pharmaceutical areas in particular.
 Trends: Capital Raising in Life Sciences
by sub-segments Jerusalem Institute for Israel Studies
Milken Innovation Center

Capital Raised by Israeli Life Sciences Companies, By Segment, 2009-2014 (in $ million)
800

700

600 261

500

400
122 174

300
69
107 410
37
200
212 285 259
186 209
100

0
2009 2010 2011 2012 2013 2014
Bioinformatics Agrobiotech Telemedicine Industrial HealthcareIT Therapeutics Medical devices Diagnostics Biologicals

Source: IVC Research Database, 2015 21

 Trends: VC Investments in Life
Sciences Jerusalem Institute for Israel Studies
Milken Innovation Center

Number of Companies and Total Quarterly Investment 2011-2014

(in million $)

250
223
206
200

152
150
126
101 112
100
63
74
45 38 45
50
28
20 15
0
2008 2009 2010 2011 2012 2013 2014 3

Investment Number of Companies

Source: PWC Money Tree, Q4 2012 and PWC Money Tree, Q3 2014
22
 Investment: VC Investment by sectors Jerusalem Institute for Israel Studies
Milken Innovation Center

Venture Capital Investments by Sector

2011-2014:Q3 (in millions $)

Cleantech
Misc
$239.0
$247.0 6%
7% Communications
Life sciences $661.0
18%
$510.0 Software
$816.0
14% Internet 22%
Semiconductor $863.0
$431.0 23%
11%

Source: PWC Money Tree

23
 Trends: Venture Capital in life sciences Jerusalem Institute for Israel Studies
Milken Innovation Center

Share of Total VC Investment in Life Sciences

18% 19%

11%
9%

2011 2012 2013 Q3: 2014

Life Sciences Sector

Source: PWC Money Tree

24
Institutional Investors investment
opportunity Jerusalem Institute for Israel Studies
Milken Innovation Center

Life sciences investments can look to new

investors and investment models for sources of
financing

25
 Exit valuations: by sector Jerusalem Institute for Israel Studies
Milken Innovation Center

Value of Exits by Sector, 2004-2013

Life sciences
Communications
17% 26%
Semiconductors
14%
Internet
8%
Cleantech Enterprise software/IT
2% 31%
Other
4%

Source: PWC Money Tree

26
 Time to Exit: By Sector Jerusalem Institute for Israel Studies
Milken Innovation Center

Time to Exit (M&A) By Sector, 2010-2014

35
30
25
20
Are we exiting too soon?
15
10
5
0
2010 2011 2012 2013 2014
Cleantech Communications IT & Enterprise Internet
Life Sciences Semiconductors Misc
Source: IVC Analytics, 2015 27
 Exits: Return on Capital Raised Jerusalem Institute for Israel Studies
Milken Innovation Center

Return on Capital Raised in Life Sciences Compared to All Sectors, 2005-2014

16
14
12
10
8
6
4
2
0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Average ROE (Life Sciences) Average ROE (All Segments)
Source: IVC Analytics, 2015 28
 Jerusalem Institute for Israel Studies
Milken Innovation Center

Technology Transfer
 Patent filings Jerusalem Institute for Israel Studies
Milken Innovation Center

Prominent areas of original patent filing applications in

2013-2012 were:
drugs (24%)
Biotechnology (17%)
Medical devices (13%)
In 2012 and 2013, approximately 56% and 53% of
applications were submitted in these segments, respectively
Most original patent requests are filed abroad (94% and
89% in 2012 and 2013 respectively).

Source: CBS, 2014 30

 Patent Requests filed by TTOs, 2012-
2013 Jerusalem Institute for Israel Studies
Milken Innovation Center

Biomedical fields at the top, Drugs 1st.

136

94
87
80
67 63 67 66 2012
2013
52 50
47
43

24 25
18
11 14 10
9
4

Source: CBS, 2014 31

 TTO Patent Portfolios Jerusalem Institute for Israel Studies
Milken Innovation Center

Portfolio = group of valid patents already marketed or to be

marketed at some point
In 2013, Drugs were the largest share of active (valid) patents in
TTO portfolios, with 23% of all patent families (all patents
stemming from the same original patent).
640
530
367 330 293
200 185
117 105
24

Source: CBS, 2014 32

 Licensing Agreements Jerusalem Institute for Israel Studies
Milken Innovation Center

Most common way to market patents.

In 2013, overall patent families in stock number was 2,791. Overall valid
licensing agreement number was 1,966 41% of the overall potential.
In 2012, most patents were licensed to Israeli companies (71%) and
17% to U.S based companies.
Of all valid licensing agreements (1,966), 263 produced royalties in
2012-2013, (13.4%), out of which 174 from Israeli companies, and the
rest, abroad.
Drugs and Biotechnology are at the top of the active licensing
agreements list: drugs with 26% and biotechnology with 20%. Medical
devices were 6.8% of all active licensing agreements.

Source: CBS, 2014 33

 Revenues from sales of IP Jerusalem Institute for Israel Studies
Milken Innovation Center

Revenues from the sale of intellectual property and royalties

in 2011 and 2012 and totaled 1,680 Million NIS and
1,881 million NIS, respectively, an increase of 11.9%.
Most revenues are from near-university TTOs.
Most of the revenue from IP and royalties received in 2012
came from Israel - 72%. The balance of the revenues came
from licenses and royalties from abroad.
The main area in revenues came from 2012 was drugs -
94%.
In addition, TTOs founded 72 start-up companies in 2012-
2013.
Source: CBS, 2014 34
 TTOs: Other Revenues (2012) Jerusalem Institute for Israel Studies
Milken Innovation Center

Other (Chief Scientist grants, usage of labs, research grants and contracts); 25%

Start-up equity revenues (dividends, options, M&A revenues); 1%

IP Sales (royalties, options, licensing); 74%

Source: CBS, 2014 35

 International Comparison Jerusalem Institute for Israel Studies
Milken Innovation Center

1
2012: Standardized by higher education R&D Expenditures. Israel Leading in all parameters. IP Revenues not mentioned because metrics differ between countries
0.9

0.8

0.7

0.6

0.5

0.4

0.3

0.2

0.1

0
Patent Requests Licensing Agreements Start-up Companies

Israel UK US Japan
Source: CBS, 2014 36
 Jerusalem Institute for Israel Studies
Milken Innovation Center

Challenges
 Development process; Active Industry
Players Jerusalem Institute for Israel Studies
Milken Innovation Center

Basic
research Validation Development
Clinical
Tech Transfer Phase I
New,
Pre- viable,
Translationa Clinical Filings & Business
clinical Approval business
l Research Phase II FDA Model
testing s exporting
Review Implementati
product
Clinical on
and
Phase III Marketing
services
Source: Milken Innovation

Channels
Development
Center

38
 Development process: Major Gaps in
Israel Jerusalem Institute for Israel Studies
Milken Innovation Center

Smart Money is Needed to Bridge All Current Gaps. Insufficient funding and knowledge
results in cumulative suboptimal performance, making further funding difficult to obtain
Basic
1. Funding for
research
transition from basic
research to 3. Funding for efficacy
applicative research, proof
and to technology Pre- Clinical Clinical Clinical Filings &
Translational
clinical
Research Phase I Phase II Phase III FDA
testing
Review

4. Massive Funding
2. Funding for safety
needed, large-scale
validation, target
Source: Milken Innovation

clinical trials,
validation, up to First in
definitive proof
Man

Risk for each phase decreases along the development chain, success rates
Center

increase
Costs for each phase increase along the development chain 39
 Business Skill-Related Obstacles Jerusalem Institute for Israel Studies
Milken Innovation Center

Lack of
Insufficient Experienced
Basic market Industry Veterans
research screening to Identify,
detect acute recruit, and
clinical need train talent
New,
Pre- Clinical viable,
Translational Filings & Business
clinical Phases I, Approval business
Research FDA Model
testing II, & III s exporting
review Implementati
product
on
and
Marketing
services
Channels
Development
Limited business
Limited planning Distance from Limited Business
entrepreneurial experience; Target Markets Model
skills or limited exposure and from development and
experience to market to Marketing hubs deployment
among focus on need
know-how
researchers
40
 Financial Obstacles Jerusalem Institute for Israel Studies
Milken Innovation Center

Initial capital
Insufficient and very expense Expensive bridge
Early stage market finance
financing; investment dilutes financing leads to
financing is based on
Basic pre-seed and entrepreneurs premature sales and
limited, undervalued
research ownership exits
expensive, and assets
impatient
New,
Pre- Clinical viable,
Translational Filings & Business
clinical Phases I, Approval business
Research FDA Model
testing II, & III s exporting
review Implementati
product
on
and
Marketing services
Insufficie Pre-clinical testing and Channels
nt trials are underfunded, Development
research limited opportunity to
support revise and redeploy

41
 Infrastructure and Service Provider
Obstacles Jerusalem Institute for Israel Studies
Milken Innovation Center

Basic
research Lack of Access to
High Throughput
Screening
New,
Pre- Clinical viable,
Translational Filings & Business
clinical Phases I, Approval business
Research FDA Model
testing II, & III s exporting
review Implementati
product
on
and
Open marketing
services
channels
Lack of facilities
International teams
and experienced
are deployed,
local service
shifting the center
providers
of effort and control
abroad

42
 Development process eco-system Jerusalem Institute for Israel Studies
Milken Innovation Center

Legal and financial OCS support/ bilateral Pre-seed and Flexible, affordable, Mezzanine and Capital market
access to IP development support seed stage intelligent (smart money) participating debt equity and debt
VC; follow-up equity and debt financing financing financing
rounds
funding
Secure
Basic
facilities,
research Identify, equipment
recruit, and
Support train talent
Research New,
Pre- Clinical viable,
Translationa Filings & Implement
clinical Phases I, Approval business
l Research FDA business
testing II, & III s exporting
Review model
product
and
Open marketing
services
Source: Milken Innovation

channels
Build team
Support
Active marketing Support accelerators and
and business Feasibility incubators
development with Studies
entrepreneurs
Center

Strategic development Strategic

Value-added partnerships (development, partnerships
marketing of IP testing, and approvals) (marketing and
solutions
delivery) 43
 Development process; Active Industry
Players Jerusalem Institute for Israel Studies
Milken Innovation Center

Orbimed Triventures Clal biotechnology

Universities Pontifax Clal Biotechnology Orbimed
Hospitals Pitango BiolineRX Pontifax
Hadasit BioHoldings
Incubators
Basic
research Validation Development
Clinical
Tech Transfer Phase I
New,
Pre- viable,
Translationa Clinical Filings & Business
clinical Approval business
l Research Phase II FDA Model
testing s exporting
Review Implementati
product
Clinical on
and
Phase III Marketing
Yissum services
Source: Milken Innovation

Channels
Hadasit Kamin Development
Yeda Nofar Angels: Mori Arkin,
Ramot Integra (Yissum) Shimon Eckhouse
B.G Negev
BIRAD Nasdaq Nasdaq
TASE TASE
Center

OCS R&D Fund

44
Examples of Strategic Partners
Presence in Local Market Jerusalem Institute for Israel Studies
Milken Innovation Center

MNC FuturX Partnership

Partnerships

45
 Jerusalem Institute for Israel Studies
Milken Innovation Center

Development Models
Financial Models Jerusalem Institute for Israel Studies
Milken Innovation Center

Program Support and Investment government grants and

program
Venture Capital private equity
Venture Capital with First Loss Protection (government
supported, private equity)
Philanthropic Venture Capital
Research-backed Obligation (RBO)

47
OCS Programs and Investment
MAGNETON
The MAGNETON program promotes
technology transfer from academia to
industry via mutual cooperation
between an individual company and
specific academic research group, in
order to reduce the uncertainty before
using the technology by the firm in
new developments. It is designed for
projects of up to USD 800,000 and has
a duration period of up to 24 months.
Grants are up to 66% of the approved
budget. No royalty payments are
mandated.
Source: Ministry of Economy
NOFAR
Industrial application of Academic
Research Designed to support applied
academic research in specific
technological areas (biotechnology,
nanotechnology, medical devices,
water & energy storage), in order to
adapt it to relevant applications in the
industry, and promotes the transfer of
these technologies to the industry.
Project's budget is up to USD 130,000
for a period of 12 months. Grants are
up to 90% of the approved budget, to
be complemented by the industrial
company accompanying the project.
No royalty payments are mandated.
Jerusalem Institute for Israel Studies
Milken Innovation Center
KAMIN
Promotion of Selected Applied
Research The KAMIN program is
designed to be an additional bridge
between basic and applied research
that is not yet ready for commercial
investment. KAMIN offers an
opportunity for academic research
groups whose research program
having reached an applied phase is no
longer eligible for basic research funds
and may now be enabled to continue
in the applied direction for up to two
years at a level of support of 85-90 %.
The remainder of the R&D costs to be
borne by the research institute. No
royalty payments are mandated.
48
OCS Program and Investment
Technological Incubators
The Technological Incubators Program was established in 1991 and
is administrated by the Office of the Chief Scientist (OCS) of the
Ministry of Economy. The primary goal of the program is to
transform innovative technological ideas, that are too risky and in
too early stage for private investments, into viable startup
companies that after the incubator term are capable of raising
money from the private sector and operate on their own.
Secondary goals of the program are as follows:
1. Promote R&D activity in peripheral and minority areas.
2. Create investment opportunities for the private sector,
including venture capitalists.
3. Transfer technologies from research institutes and implement
them in the industry.
4. Create an entrepreneurship culture in Israel.
For a period of up to two years (Biotech projects up to three years),
the program provides entrepreneurs, whose projects were
approved by the Incubators Committee, with R&D and marketing
grants, infrastructure, technological & business guidance, legal &
regulatory advice, and administrative assistance. The program is
subject to the R&D law with regards to manufacturing, royalties
and know-how
Source: Ministry ofrights
Economy
Jerusalem Institute for Israel Studies
Milken Innovation Center
TZATAM
Life-Sciences R&D Supporting-Equipment
Purchase Grants This TELEM instrument is
designed to assist experienced companies
specializing in providing research services in the
field of Life Sciences by enabling them the
purchase expensive equipment, thus
strengthening the domestic Life Sciences R&D
capabilities. Entities both in Industry and
Academia are able to broaden the scope of the
research they conduct. OCS equipment-
purchase grants assist in the validation of
scientific and technological feasibility of
discoveries and in the receipt of approvals to
perform clinical trials. USD 10 million has been
allocated for the project, over a three year
period. An additional USD 10 million has been
allocated specifically for stem-cell research
equipment.
49
OCS Incubators (life sciences exclusive)
Jerusalem Institute for Israel Studies
Milken Innovation Center

Incubator Shareholders Fields Financial Terms Additional Resources

FuturX Joint Venture by Orbimed,
Rad Biomed
Alon Medtech Ventures
NGT VC
Trendlines Medical
Abital Pharma Pipelines Goldsobel and Ofer Hitech
Inspire Healthcare
Innovations
Source: Ministry of Economy
Biotechnology and 8.1 Million NIS per project Biotech million oriented.
Takeda and J&J pharma for 3 years. Government Operational expenditures by
grants 85%, incubator finds incubator are almost 2 fold
the complementary 15% higher; a lab should be
present, strategic partners
offer consultation and
infrastructure
Yehuda Zisapel Life Sciences 2-3.5 Million NIS per Infrastructure, professional
project for two years. support, central lab
Government grants 85%,
incubator finds the
complementary 15%
Shimon Eckhouse Medical Devices Infrastructure, professional
support
several Life Sciences Infrastructure, professional
support
Trendlines Group Medical Devices Infrastructure, professional
support
Life Sciences Infrastructure, professional
support
Teva and Philipps Medtech Infrastructure, professional
support 50
 Venture Capital Jerusalem Institute for Israel Studies
Milken Innovation Center

Pension funds Capital structure

Managing Partners
Insurance funds

Limited partners Strategic partners

Philanthropic 80%
General partners
investors 20% Financial team
Qualified individuals

Venture Capital Fund Active VCs in Israel:

Source: Milken Innovation

Pitango
Pontifax
Entrepreneur

Pre-seed investors
Life sciences
Center

Technology transfer company

organization start-ups
 Venture capital with first loss
protection Jerusalem Institute for Israel Studies
Milken Innovation Center

Pension funds Capital structure

Managing Partners
Insurance funds

Limited partners Strategic partners

Philanthropic 80%
Public General partners
investors investment 20% Financial team
- 1st loss
funding
Qualified individuals

Venture Capital Fund Active VCs in Israel:

Source: Milken Innovation

Orbimed

Entrepreneur

Pre-seed investors
Life sciences
Center

Technology transfer company

organization start-ups
1st Loss Example: Orbimed Fund Jerusalem Institute for Israel Studies
Milken Innovation Center

Orbimed manages $222 Million

The government invested $50 Million, and granted first-loss
protection
Unlike the typical venture capital funds, Orbimed can offer
companies a longer financial horizon
This is due to its exclusive focus on life sciences
Risk mitigation strategy includes both active leadership and
prominent LPs (government, strategic partners)
Syndication through international/strategic partners a crucial
layer
Orbimed: Diverse Resources Jerusalem Institute for Israel Studies
Milken Innovation Center

Orbimed also partly controls the FuturX incubator (together with

Takeda and Johnson & Johnson), aiming to invest smart money
also in very early stages
Orbimed, as an international fund with life sciences expertise, is
able to connect companies with IP professionals, regulation
professionals, clinical professionals, experts as board members,
and corporations or large investors as syndicates.
 Research-based Obligations Jerusalem Institute for Israel Studies
Milken Innovation Center

E
Investors in SPV:
q
Priority distributions:
Early equity ui 1.Interest payments on
investments Debt interest pricing ty
Sub bonds
Long-term sub bonds 2.Principal payments on
sold to philanthropic
based on security and Bonds
risk bonds
investments secured 3.Contingent residual
by SPVs assets Senior Bonds payments on equity
Long-term senior
bonds sold to pension
and insurance funds Equity SPV Returns
investment deployed to
investments secured
by SPVs assets
structured Portfolio build
portfolio
Revenues Limited
Limited
philanthropic
private guarantee
guarantees
Limited public guarantee
Licensing (insurance)
Source: Milken Innovation

Pre-clinical IP
agreements
Clinical I IP Royalty payments
Clinical II IP IPOs and sales
Clinical III IP

Translational
Center

Research/ Management Business Legal Marketing

Tech Transfer development
55
 RBO:
The cash flow waterfall: Converting
portfolio cash flows into bond Jerusalem Institute for Israel Studies
Milken Innovation Center

payments
Equity
Residual

Sub Bonds
Interest Payments

Sr. Sub Bonds

Interest Payments

Sr. Bonds
Interest Payments
2013 by Fagnan, Fernandez,
Stein, and Lo All Rights
Reserved

Year
MIT LFE Year 1 Year 2 Year 3 Year 4
10
56
 RBO:
A stylized view of how a portfolio of
compounds generates smoother cash Jerusalem Institute for Israel Studies

flow
Milken Innovation Center

Approved
Phase III
Phase II WD/Sold
Phase I WD/Sold
1 Approved
WD/Sold
Phase III
WD/Sold
Phase II WD/Sold
Phase I WD/Sold
2013 by Fagnan, Fernandez,

2 WD/Sold
Stein, and Lo All Rights

WD/Sold Approved
Phase III
Reserved

Phase II WD/Sold
Phase I WD/Sold
150 WD/Sold
WD/Sold
MIT LFE Year 57
Year 1 Year 2 Year 3 Year 4
10
 RBO:
Guarantees make the debt more Jerusalem Institute for Israel Studies

marketable at low expected cost Milken Innovation Center

Lower development costs

2X more likely approval of FDA
(22% approval from 1993 to
2004, compared with 11% in
general, and 6-7% of cancer
drugs)
Lower correlations between
2013 by Fagnan, Fernandez,

failures of various drugs

Stein, and Lo All Rights

Require less capital to reduce

Reserved

investment risk (even mega

fund model)
Simulation: $ 575 million, 10-
20 projects portfolio, double-
digit return
58
Venture Philanthropy
FasterCures: Therapy Accelerations Jerusalem Institute for Israel Studies

Program Milken Innovation Center

Relevant participants involved: basic and translational research, industry,

regulators, hospitals, insurers
Organizational activities:
Development
Market development and customer administration/ support
Clinical trials (integration of medical centers and trial programs)
Therapy Acceleration Program (TAP) to cover all phases of development
Biotech Accelerator partnerships with small biotech companies in various markets
Academic partnerships to encourage researchers to develop marketable innovations (development grants)
Industry research partnerships between established biotech companies and research institutions
Targets, Leads and Candidates Program for discovery and development
Partnerships between the LLS and the pharmaceutical industry
Enables 3rd party participation in and support of LLS research programs
LLS provides process and infrastructure for identifying
high quality research; project management
Venture Philanthropy - LLS Programs:
Basic Funding and Criteria for Jerusalem Institute for Israel Studies

Investment Milken Innovation Center

Targets, Leads and Candidates

Discovery Development Commercialize

$60 M Research $20 M Therapy $44 M Co-Pay

Grants Acceleration
Focus on projects with no clinical trials to avoid crowded areas
Quality of the science and level of innovation
Business and finance development opportunities
Potential for added value by LLS as partner
Potential for returns of investment to LLS
Not all projects are missioned to reach full commercialization, some projects are to end phase II through the
program and then be out licensed
Due diligence for each project, including IP patents, budgeting, schedule, technologies, and market potential
Venture Philanthropy - LLS Program:
Pipeline and progress Jerusalem Institute for Israel Studies
Milken Innovation Center

Small
Companies
Partnerships

Academia
Partnerships

61
 Jerusalem Institute for Israel Studies
Milken Innovation Center

Business Models
Jerusalem Institute for Israel Studies
Milken Innovation Center

63
Yissum
Jerusalem Institute for Israel Studies
Milken Innovation Center

64
YEDA Weizman Institute Jerusalem Institute for Israel Studies
Milken Innovation Center

Pipeline 65
BiolineRX Jerusalem Institute for Israel Studies
Milken Innovation Center

BioLineRxis a clinical-stage, publicly-traded (NASDAQ/ TASE: BLRX) biopharmaceutical development

company based in Jerusalem, Israel.
The Company develops products suitable for the pharmaceutical market satisfying an unmet medical
need or exhibiting advantages over current therapies.
BioLineRx'sclose ties with universities, research institutes,
academic institutions, technology transfer offices and
biotechnology companies, both in Israel and globally, enable
access to promising projects at an early stage.
The first stage involves a stringent selection process. BioLineRx's scientists
specialize in evaluating potential drug candidates from both scientific and
marketing perspectives.
After acquiring the most promising projects, the Company then performs
feasibility assessment studies and development through pre-clinical and
clinical stages.
Supported and assisted by a distinguished panel of scientific advisers, the
Company's scientists and experts in pharmacy and regulation, clinical trials
and IP work together to advance BioLineRxs pipeline usually through Phase
II proof of concept in humans.
And finally, the Company partners with medium size and large
pharmaceutical companies to complete the clinical development and bring
the product to market. 66
BioLineRxs pipeline currently consists of six clinical stage