News: Thesis "Israel the new Silicon Valley": Israel's leading sectors
Par IsraelValley Desk
Rubrique: Universités, sciences et r&d
Publié le 17 octobre 2007 à 07:41
IsraelValley will publish each week a part of the thesis “Israel the new ‘Silicon Valley’” wrote by Karen Vainunska and Yael Rosenberg. You can download the whole thesis here
ISRAEL’S FAR SECTORS
a- Biotechnology
The country has a natural breeding ground for biotechnology development, being also a leader in agricultural biotechnology.
Moreover, with a high percentage of graduates in mathematics, physics and computer sciences, Israel is known for its large numbers of centers of research and development. The industry is in the right place to make an impact in interdisciplinary technologies such as bioinformatics (the creation of sophisticated machinery capable of going through the vast amounts of molecular information accumulated by the Human Genome Project) and proteomics (the identification of proteins through human tissue analysis). Israel has also taken a world-leading role in cancer and autoimmune diseases research, as well as research into diseases of the central nervous system.
Some figures of today’s biotechnology sector
There are about 160 biotech companies currently operating in Israel, running from therapeutic pharmaceuticals to diagnostics, bioinformatics and agricultural biotechnology. In 2000, 25 new companies were registered, $203 million were invested privately in biotechnology-based business and three companies raised $140 million on foreign stock exchanges. The industry employs 4,000 persons and sales reached $800 million – up from $600 million the previous year – with 80% of biotech products going to export.
Leading Companies
- Teva Pharmaceutical Industries is Israel’s leading drug company being one of the world’s largest manufacturers of generic pharmaceuticals. In addition to generic drugs, the company spent 10 years developing its first proprietary drug, Copaxone, for the treatment of multiple sclerosis. The drug administered by injection has the efficacy of rival beta interferon treatments, but with less disturbing side effects. Teva has also invested in start-up biotechnology companies including Peptor, which has developed a drug to halt the development of type-1 diabetes, thereby reducing the need for a daily insulin injection, and in Proneuron Biotechnologies, whose work in immune system cells could lead to a recovery for people paralyzed by injuries to the spinal cord. In addition, Teva is developing experimental proprietary treatments for Parkinson’s disease, Alzheimer’s disease, epilepsy and other medical conditions.
- Bio-Technology General Corp. develops, manufactures and markets products for human health care. It was founded in the mid-1980s and spent almost 15 years in research and development – investing over $100 million – before it saw revenues. Today it has many products on the markets of the U.S., Europe and the Far East, including a genetically engineered growth hormone called Bio-Tropin and Bio-Hep-B, the first recombinant hepatitis B vaccine to be approved anywhere in the world. The company continues to actively invest in drug development, and has a number of promising products in project.
- D-Pharm employs proprietary technology that re-engineers existing drugs rather than creating new ones. The company begins with an active ingredient already known to be effective and then modifies it to make it work more efficiently and with fewer side effects, thus enabling physicians to reduce the dosage. At present, the company is developing a drug called DP-VPA for treating epilepsy, bipolar disorder and migraine prophylaxis and is working on other drugs for the treatment of cerebral strokes.
- XTL Biopharmaceuticals develops new therapeutics to treat life-threatening infectious diseases, based on human monoclonal antibodies and small-molecule drugs. It is currently focusing on therapeutics for hepatitis B and hepatitis C viruses, both on its own and in collaboration with other biopharmaceutical companies. XTL’s Trimera technology may be used to develop models of human diseases for the early stages of preclinical testing. One of XTL’s most important clients for Trimera is the American pharmaceutical company Eli Lilly, which is using the model to test an anti-hepatitis C drug.
- Compugen, a bioinformatics and proteomics company was founded in 1993 by three graduates of an elite military intelligence unit. The company’s technology platforms help scientists gather and process the huge amount of data generated by the Human Genome Project and to develop new drugs more quickly. In addition, Compugen offers other solutions to address the needs of pharmaceutical, biotechnology and life sciences targeted on new and more effective pharmaceuticals. Its customer base includes international pharmaceutical concerns like Eli Lilly, Merck, SmithKline Beecham Pharmaceuticals, Novartis and Millennium Pharmaceuticals.
- Keryx Biopharmaceuticals, founded in 1998, uses its KinAce bioinformatics drug-discovery platform to target protein kinesis, thereby generating potential new pharmaceutical therapies. By targeting specific portions of protein kinesis, the company has produced 14 lead drug compounds. One drug currently under development is KRX-101, which will treat diabetic nephropathy, a condition which leads to kidney failure and is one of the most common complications of type-II diabetes. Another is KRX-123, which is targeted at hormone-resistant prostate cancer, a condition for which there is no effective treatment today.
Medical Advances
Academic research funds in the 1970s and 1980s tended to fund pharmaceutical and biotech-oriented research, but a few companies developed medical equipment. The 1990s saw the emergence of many such companies and a growing amount of private equity capital to invest in it. Elscint developed medical imaging tools and Lumenis grew to be the world’s largest maker of laser instruments for cosmetic skin surgery, as well as for those used in surgery on teeth, ears, nose and throat.
The industry is also seeing an influx of second-generation entrepreneurs from the software and telecommunication industries that are looking to apply their skills in other places. Given Imaging has developed an encapsulated miniature camera that is swallowed by the patient. The capsule travels down the small bowel, sending images to a screen from which doctors may accurately diagnose gastrointestinal disorders and diseases, without the need for invasive exploratory surgery. TransScan’s patented technology detects breast cancer using non-invasive methods, and Odin Medical Technologies has a unique MRI (magnetic resonance imaging) platform using small, movable scanners. Applied Spectral Imaging combines conventional imaging and spectroscopy to reveal information not normally visible by conventional imaging systems.
There have also been significant advances in non-invasive medical procedures. Glucon is developing a technique for measuring blood components that could lead to a home-based, continuous monitoring of glucose for diabetics, while OrSense’s sensor technology measures parameters like blood glucose, hemoglobin and cholesterol by means of a finger probe. Inventis has a device for the non-invasive treatment of male impotence.
In the area of cardiac surgical devices, InStent – manufacturers of devices which hold open previously blocked heart arteries – merged with the American company Medtronic; Medinol, another cardiac stent company, was acquired by Boston Scientific; and Biosense, a maker of cardiac electrophysiology mapping and ablation systems was acquired by Cordis, a division of America’s Johnson & Johnson.
NESS (Neuromuscular Electrical Stimulation Systems Ltd.) develops and manufactures unique systems for the rehabilitation of impairments resulting from disorders of the central nervous system. It recently received FDA approval for its noninvasive, neuro-prosthetic device, the Handmaster. This medical device helps activate the impaired or paralyzed hand of a person who has suffered a stroke through low-level electronic pulses that stimulate the neuromuscular system and activate the muscles of the hand and forearm to restore natural movements to the hand.
b- The Communications Industry
The telecommunications sector has been transformed from a stagnating state-owned monopoly into a competitive market offering a variety of advanced services over the last decade. Many of them are based on innovations developed by local companies. The number of telephone lines, mobile phones and Internet connections places Israel high in world ratings, and for most services, tariffs are relatively low. This has made telecommunications widely and easily available to a population fond of high technology.
- Telecommunication
The total annual telecommunications equipment and services market in Israel was estimated at $4.3 billion in 1999, with 2.9 million main phone lines. The number of cellular phone lines finally surpassed the number of fixed lines by mid-2000, when it reached 3.4 million, and cell phones now comprise the largest portion of the telecommunications market. Some 66% of the Israeli population, or four million people, own a cellular phone, giving Israel one of the world’s highest rates in terms of mobile users. - The Internet
Well over 2.5 million Israelis use the Internet on a regular basis, and the number is growing annually at a rate of roughly 30%. However, while the number of PCs per household is a high 60%, the Internet penetration rate at the end of 1999 was 164 per 1,000 people, relatively low compared to 213 in Britain and 398 in the United States. Industry experts variously attribute Israel’s relatively low rate to language difficulties (most of the Internet is in English), high tariffs and the absence of high-speed Internet access in private homes.
The cell phone market
The cell phone market is served by four companies, all of which cover the entire country. Pele-Phone, founded in 1990 as a joint venture of Bezeq and Motorola Israel, today has about 1.5 million subscribers. Pele-Phone uses NAMPS network technology and has also begun implementing the more advanced CDMA technology. It also offers a cellular Internet service, known as GoNext. Cellcom, the second cellular operator, is partly owned by Bellsouth Corp. of the U.S., the rest by other foreign and local investors. It provides services to its 1.85 million customers using TDMA technology. A third provider, Partner, has 800,000 subscribers, and uses the GSM standard; it is controlled by a consortium led by Hong Kong’s Hutchison.
A fourth company called MIRS (Motorola Integrated Radio Services) uses an advanced form of two-way radio communications to provide a service that combines radio dispatch, cellular phone, pager and mobile PC services. MIRS’ iDEN (integrated digital enhanced network) or Tetra technology runs at 95 kilobytes per second enables users to e-mail and access some Internet portals. The company, which is two-thirds owned by Motorola Israel, boasts some 155,000 subscribers, or 2.5% of Israel’s population – the world’s highest penetration rate for this kind of technology.
For many experts and specialists in Israel, the success of this country in the high-tech field is mainly due to the influences of the Israeli Defense Forces, the country’s military industry, its military intelligence units, its research institutes and its universities.
The large market of the world’s security technologies has always served as a crucial meeting place for governments as well as for private institutions, where investments and information flow easily between nations. The field of security development, be it weaponry or defense systems, has thrived and grown to a previously unseen size, at the forefront of which lies the State of Israel.
Having emerged as a leader and innovator in security, Israel now exports approximately 75% of what it produces in weaponry, primarily to India, the United States, and the European Union. In 2006, the country’s defense systems exports reached a new peak of $3.6 billion worth of contracts.
These figures place Israel as the fourth largest exporter of security technology and weaponry in the world, behind the United States, Russia, and France.
A distinctive characteristic of this Israeli market is its research and development of innovative technology throughout many different fields.
Several notable companies have provided services across dozens of countries including to governments:
- Israel Aerospace Industries (IAI) Ltd. is the chief aviation manufacturer in the State; it is government-owned and currently employs over 15,000 employees. Sales in the first six months of 2006 exceeded $1.3 billion. IAI is frequently contracted by the Israeli Defense Force, as well as by militaries abroad, to provide both aerospace technology as well as naval and ground attack and defense systems.
- Israel Military Industries (IMI) Ltd. is Israel’s government-owned, primary manufacturer of weaponry. It regularly sells to the Israeli Defense Force (IDF), the United States Military – Army, Air Force, and Navy – as well as several other NATO countries. Sales for 2007 have been forecasted at $620 million, and the company employs 3,080 employees worldwide.
- RAFAEL Armament Development Authority Ltd. “designs, develops, manufactures and supplies a wide range of high-tech defense systems for air, land, sea and space applications”. Originally a subdivision of the Ministry of Defense in Israel, the government-owned company has its base in Haifa and is often commissioned by the IDF to create specific products for the military. It employs approximately 5,000 people, and nearly half of its production is exported to European countries.
- Elbit Systems Ltd., privately owned and basic in Haifa, “develops, manufactures and integrates advanced, high-performance defense electronic and electro-optic systems” and has been contracted by the United States as well as several other undisclosed governments. The company currently employs over 6,000 employees worldwide.
- Plasan Sasa, privately owned and based in Kibbutz Sasa northern Israel, specializes in the development of ballistic armor protection for armored vehicles, including cars, aircrafts, and naval vehicles. In June, the company signed a contract of $200 million to provide the United States Marines with 1,200 Mine Resistant Ambush Protected (MRAP) Vehicles by February 2008.
In total, the sector is comprised of over 150 firms, employing a total of 50,000 workers, and earning combined revenues of an estimated $3.5 billion each year.
Originally, the idea behind UAV’s, also called drones, was to cut the loss of pilots to a minimum in the event of war, and to track enemy territory. Currently, drones are used for reconnaissance purposes, but major technological advancements are required before they can be used for combat purposes (mainly because these are rapidly changing situations in which human intelligence is more efficient than computers).
The main world producers of UAV’s are Teledyne Ryan Aeronautical and Northrop Grumman in the US Target Technologies and Aerospatiale in Europe, I.Z.I. in Israel, Kentron in Africa, and Fuji Heavy Industries in Asia.
An analysis of the industry reveals the following key elements of Israeli strategy:
- Succeeding at all costs in the long term by using technological innovation as a priority and establishing technological partnerships with foreign industrialists in order to make the best of technological know-how.
- Assimilating all technology and know-how without becoming victims of the “not invented here” syndrome; Israeli industrialists and scientists have no difficulty in integrating foreign know-how in their product development and are capable of using reverse engineering in a quasi-scientific manner (dismantling competitors’ products to rebuild them).
- Using economic and technological intelligence as a management tool: given the highly competitive nature of the industry, Israelis are closely watching and analyzing the operational strategies of other players in the market in order to compete.
- Turning toward civilian or military authorities for direct and indirect support (R&D financing, testing orders, tax exemptions, free trade zones…). These authorities, working on tight research budgets, usually scatters orders across at least 20 companies thriving around the market leader, Israel Aircraft Industries (IAI).
An increasingly enthusiastic and organized competition – The world market for UAVs in 2000 represented only $2.4 billion. By 2007, this amount is estimated to reach nearly $5.6 billion, and exceed $10 billion by 2012. Once technological and regulatory issues will be overcome to the satisfaction of the potential market, revenues should increase dramatically. Moreover, the market is forecast to become increasingly competitive, which will reduce the number of participants.
The increasing maturity of technology in the UAV industry would lead to a reduction in the number of manufacturers, which currently range in size from market leaders such as IAI Malat Division and larger manufacturers such as Lockheed Martin to smaller national companies.
It is also important to note that the Israelis start with new markets. Thus, for example, Singapore Technologies has signed in 1991 a $14 million contract with Israel’s Emit Aviation Consultancy for the new Blue Horizon UAV. Israeli drones also find applications in new fields, such as mine detection and radar jamming.
d- Agro-Technology
Israel is internationally recognized as a leader in cutting edge agricultural advancements. Israel’s high level of development is due to the close cooperation between scientists, extension advisers, farmers, and agriculture-related industries, all of which contribute to the manufacturing of advanced technologies used locally and around the world.
Actually, Israel is among the world’s leaders in allocation of financial resources to research and development to the agriculture industry. Some $90 million are invested annually in R&D, representing 3% of the agricultural GNP.
As a result of intense R&D and successful technological applications, Israeli agriculture has become a model for efficient use of water, land and human labor, accompanied by record yields of high-quality products.
The growing awareness of the importance of ecologically oriented agriculture has led to the development of “green” fruit, grown with minimal use of chemicals to avoid interfering with the ecosystem or harming the environment. Production is according to the quality management requirements of the European market, in compliance with EurepGap 2000 principles, ISO standards and crop management protocols.
The close cooperation between the R&D and the industry led to the development of a market-oriented agro-business that exports agro-technology solutions worldwide.
Moreover, the Israeli government and other public sources contribute approximately $50 million annually to the ARO and the Chief Scientist’s Fund, whose establishment resulted in a significant increase in agricultural R&D investment.
The international cooperation is very important to the growth of the Israeli agro-technology and Israel participates in training, joint research projects, transfer of knowledge, and exchange of experts with countries around the world including Japan, Jordan, Australia, India and the USA.
Dairy products and technology exports include advanced and computerized milking and feeding systems, cow-cooling systems (to reduce heat stress on cows in hot and dry summer), as well as milk processing equipment, consultancy, and joint international project development.
Water Problems and Possibilities
Israel has striking rainfall inequalities. While the north of the country enjoys a relatively generous rainfall of 700 millimeters each year, the central region receives only 400-600 millimeters and the south sees a meager 25 millimeters annually. The National Water Carrier, which transports water from north to south, has helped to remedy these regional imbalances.
Beyond transportation, Israel has developed effective solutions for the dearth of water in some areas. Efficient water management has increased agricultural output 12-fold during the past 50 years, while water consumption has remained constant through rigorous maintenance of infrastructure, replenishing of aquifers and the allocation of appropriate quotas and pricing to discourage wasteful consumption.
The use of recycled water has provided another solution. Out of 1.1 billion cubic meters of water used for agriculture in 1998, approximately 250 million cubic meters were recycled effluents. The Water Commission forecasts that by 2010 one third of all crops will be irrigated with “cleaned” water. Twenty-four desalination plants in Eilat, the Dead Sea region and the Arava Desert supply another 161 million cubic meters of irrigation water each year.
Another 70 million cubic meters of water are generated annually from underground sources; geothermal waters found beneath the surface of the Negev desert are also used. Farmers have found that salt water produces “sweeter” crops than regular water. “Desert sweet” tomatoes and melons, for instance, fetch premium prices on European markets.
Cloud seeding (injecting clouds with iodine to increase the percentage of water that each cloud yields) has proven effective. Exploration (using sophisticated seismological techniques), prevention of pollution, soil conservation and drainage have all maximized water use. Landscaping to redirect floodwaters, computerized calculations to chart routes of runoff water and the strategic placement of trees and crops have also prevented desertification.
