There are two main new world trends in healthcare both of which create enormous opportunities for Israeli companies in the field of healthtech and personalized medicine, explains Itai Kela (Ph.D., MBA) Senior Director Healthcare and Biotechnology at the Israel Innovation Authority.
"The first is the move from sick-care to healthcare and to preventive-care, in other words using big data digital analysis for early detection and prevention of diseases rather than treating people once they are chronically ill, says Dr. Kela."The second is the use of big data in pharmaceutical research to shorten drug development and cut the growing costs of discovering and bringing to market new therapies, which are creating a crisis in the pharmaceutical industry."

Over the past three decades, the Israel Innovation Authority and its forerunner the Office of the Chief Scientist (OCS) and MATIMOP have developed a range of practical tools, funding platforms and innovative programs to share in the risks of Israeli startups and more mature companies, which have made a major contribution to the emergence of Israel as a global high-tech power.
The remarkable rise of Israel's innovative industries is exemplified by the healthtech industry (Biopharmaceuticals, Medical Devices and Digital Health). In 1996, there were 186 companies in this sector while today there are over 1,500 companies with 120 new companies being formed every year. 40% of these companies are already generating revenues. "More than 25% of the grants we make are for biomedical projects and we see this support moving towards 30% of our entire budget," says Dr. Kela.
Israel has one of the highest number of PhDs and patents per capita worldwide. However, many of these ideas do not mature to successful companies, or if they do it is outside Israel, thus the major role of the Israel Innovation Authority is to ensure that ideas are fostered effectively and remain in Israel.
With a budget of over $500 million from the Israeli government, (complemented by the EU's Horizon 2020 program), and grants that are paid back in the form of royalties, the Israel Innovation Authority supports carefully selected innovative projects, and in particular shares in the risks of groundbreaking projects that might otherwise struggle to raise investment from the private sector.
The Israel Innovation Authority itself was set up in 2016 as an independent and impartial public entity that operates for the benefit of the Israel innovation ecosystem and the Israeli economy as a whole. Its role is to nurture and develop Israel's innovation resources, while creating and strengthening the technology based industries. "The risks are higher in healthtech," says Dr. Kela, "because in medical devices and especially biopharmaceuticals, the development process is complex, costly, arduous, and long with regulatory obstacles to be overcome and no guarantee that the product will ever be approved, let alone commercially successful. However, digital health, as well as opening up new opportunities for Israeli companies, is also helping to reduce risks and costs."

Israel currently has over 500 companies operating in the digital healthcare space, leveraging big data, artificial intelligence, and machine learning. In the past few years these companies have joined hundreds more companies in Israel's biomed sector engaged in areas ranging from biopharmaceuticals and drug development through to medical devices.
Dr. Kela stresses that the emergence of digital health technologies will enable the healthtech industry worldwide to cope with a crisis, which is about both healthcare and economics. "People are living longer," he says, "but this is generating huge expenditure on treating people who are chronically ill. 85% of the US healthcare budget goes on the chronically ill."
Digital health solutions such as artificial intelligence (AI) and machine learning (ML) technologies have the ability to prevent many of these chronic illnesses developing in the first place through early detection and prevention. AI/ML technologies can identify patients at risk by discerning patterns from patient's blood tests and other samples and genetic testing. Similarly the pharmaceutical industry is in desperate need for AI/ML solutions to increase R&D productivity and to develop personalized treatments. "The pharmaceutical industry is in crisis," observes Dr. Kela. "R&D has become much more expensive with the typical cost of developing a new drug doubling over the past decade from $1 billion to $2 billion, while the return on Investment in R&D is decreasing, and the threat of patent cliff (patent expiration, which leads to a sharp drop in sales) means there is a need for new drugs to come through the pipeline."
Dr. Kela explains that AI/ML advanced technologies can use big data to transform the entire drug development process and streamline the discovery process by identifying new drugs more rapidly than conventional means and increase the success rate of clinical trials and help find new pharmaceuticals at lower cost and in a shorter time."
Another advantage Israel possesses is that it has an advanced health system with extensive health data, where 98% of the population has 20 year old detailed electronic medical records.


Dr. Kela cites a further advantage that Israel offers global health-tech companies looking for new sources of innovation. Today's general notion is that the leading innovations will emerge from the convergence of technologies from different disciplines. The scientific and technological advances of the last decade have brought us to a tipping point, in which major medical breakthroughs stemming from the integration of the life sciences with engineering, nanotechnologies, physics, and information technology are becoming possible. The emerging bio-convergence has a remarkable potential to have a transformative impact on health and healthcare practices – in disease prevention, better diagnosis, new therapies and improved gene delivery to highly specific targets, as well as presenting entirely new possibilities enabled by big data and AI insights.
"In Israel we see top medical research and integrated healthcare systems, innovative biopharma technologies, an established med-tech industry, and a fast growing digital health sector with more than 500 startups collaborating in a range of frameworks and this makes for a very attractive ecosystem for many of the world's big companies," Dr. Kela says.
He adds, "Israel has the substantial strengths and capabilities to build a leading position in the emerging Bio-convergent healthtech industry.. This has the potential to become the next growth engine of the Israeli economy alongside the ICT sector."

This sector's integration is reflected in the Israeli government decision in March 2018 to allocate a budget of NIS 922 million ($260 million) to an ambitious digital healthcare program – an opportunity not only to improve the healthcare system, but also provide a boost for Israeli companies developing digital healthcare technologies as well as enable predictive, preventive and personalized medicines.
The Israel Innovation Authority works closely with the Ministry of Health, Ministry of Economy and other government agencies to implement this program, provide incentives for startups, to enable collaboration between startups, local and international healthcare providers, and train personnel in this sector.
Within six months of the program's inception, $20 million (50% by the Israel Innovation Authority) had been allocated to 20 hospitals, 16 health organizations and 24 collaborations, which will help speed up the integration between medical organizations and industry. In addition the first Track 35 tender was approved for GE Healthcare, Medtronic and Change Healthcare to help them expand their research and development centers in Israel.


The Israel Innovation's Growth Division operates the main R&D Fund supporting competitive R&D. This is the organization's main incentive program designed for industrial R&D support for the development of competitive products and innovative processes. The R&D Fund offers the greatest financial incentives for R&D activities from the Israeli government, providing commercial companies in all areas with support for the development processes of new products or the upgrade of existing technologies.
The Growth Division offers a range of other incentives in numerous topics from greenhouse gas emission reduction, to agriculture, space technology and alternative fuels for transportation.

In addition to the grants and a wide range of other incentives offered by the Growth Division, the Israel Innovation Authority's Startup Division operates what is perhaps the organization's best-known program – a national network of 18 technological incubators plus an additional one – FutuRx – dedicated to biotechnology, located in Ness Ziona near the Weizmann Institute of Science in Rehovot, where larger grants are available.
FutuRx is an international consortium of leading companies Johnson & Johnson, Japan's Takeda Pharmaceuticals and venture capital fund OrbiMed Israel Partners.
"FutuRx is an example of a successful innovation engine model, which brings together major global players Takeda and J&J who have the infrastructure, knowhow and experience to bring the best out of Israeli startups," Dr. Kela says.
Among FutuRx's 17 portfolio companies, several have already achieved major financing rounds, including microbiome therapeutics company BiomX, which has raised $56 million in two financing rounds and neurological therapy company Mitoconix Bio, which has raised $20 million.
One third of the other incubators have major international partners and ten of the regular incubators focus on Life Sciences projects. 38% of the projects in the incubators are in Life Sciences technologies.
Among the incubators focusing on Life Sciences is Sanara Ventures in Ra'anana, owned by Philips Healthcare and Teva Pharmaceuticals, MedX in Or-Yehuda, owned by Boston Scientific, and MindUp in Haifa owned by Medtronic, IBM, Pitango and Rambam Hospital, and eHealth Ventures in Modi'in Illit owned by Maccabi Health Services, Cleveland Clinic, Amgen and Shanghai Creation.
Many of the incubators are in the peripheral regions and a recent change in the program encourages each incubator to open branches in peripheral regions where they will be able to operate up to 30% of their activities.
The incubators, which began in 1991 as a government enterprise as centers for entrepreneurship designed to invest in the earliest stage startups and provide them with administrative, technological and business support, have since evolved into a public-private partnerships. Private companies or groups win tenders to operate an incubator for eight years during this time period projects they support can receive government funding of 85% of the budget for each startup company in the incubator with the Incubator providing the balance and all the infrastructure costs from offices and laboratories to the staff, business development etc. Since its inception, more than 1,000 startups have raised billions of dollars in the incubator program. The Startup Division also offers a range of other incentive programs including Tnufa for fledgling enterprises looking to formulate and validate an innovative technology concept and the Early Stage Incentive Program for startups with a range of grants linked to sub-programs. The Young Entrepreneurship Incentive Program is training the next generation of Israel's entrepreneurs and the Renewable Energy Technology Center supports technological ventures and R&D projects from applied academic research and early stage entrepreneurship.


The Israel Innovation Authority gives top priority to attracting global companies to invest in Israel – one example is the aforementioned Track 35 to encourage global companies to establish R&D activities in the fields of biotechnology, medical devices or digital health. The Authority is also in discussions with several international pharmaceutical companies for the possibility of them setting up laboratories and R&D activity in Israel.
At the same time, the Israel Innovation Authority's International Collaboration Division offers a range of incentive programs based on bilateral government-to-government agreements for parallel support between government agencies and regional authorities. The Authority operates these programs in collaboration with R&D and innovation funding bodies in leading countries, provinces and cities in the Asia-Pacific region, the Americas, and Europe. There are also five bi-national funds offering matching funds for projects involving partner companies in each of the countries involved: BIRD – Israel United States; CIIRDF – Israel – Canada; SIIRD – Israel – Singapore; KORIL – Israel – Korea and the recently formed, i4F – Israel - India.
In addition, Israel is a member of the EU Framework Program for Research and Innovation, which offers grants to multinational consortiums working on R&D and innovative projects. The current program Horizon 2020 (2014-2020) has a multi-year budget to which Israel has contributed €1 billion out of the €77 billion budget. It will be succeeded by Horizon Euro pe (2021-2027) the next seven year program.
The International Collaboration Division also operates the Global Enterprise R&D collaboration program connecting foreign multinational corporations and innovative Israeli companies, an incentive program for adapting products for emerging markets and an incentive program for the establishment of project centers of multinational companies in Israel.

As already mentioned, Israel's unique ecosystem brings together and integrates hospitals and health funds with the different areas of industry. In addition, Israel also has a strong connection between industry, academia and government.
The Technological Infrastructure Division focuses on collaboration between industry and academia to produce advanced technologies and innovative products. These programs include the MAGNET consortiums of industrial companies and research institutions collaborating on generic pre-competitive technological R&D. The MAGNETON Incentive program encourages the transfer of technological knowledge accumulated in academia for the use of industry and the NOFAR Incentive Program provides support for applied research in academia with potential contribution to the economy. The Biotechnology TZATAM incentive program offers financial support for R&D processes in Life Sciences and the Biotechnology – MIDGAM Bank (Tissue Bank) is an organized collection of human biological material, stored for medical or biological research purposes, and operated under the supervision of the Ministry of Health.
The Israel Innovation Authority has also an Advanced Manufacturing Division with incentive programs for low-tech industry and a Societal Challenges Division offering incentives to make high-tech more inclusive.
"In the emerging Bio-convergence field, the potential for Israel's healthtech sector to become a major economic growth engine for the future is enormous," concludes Dr. Kela. "We are receiving regular serious enquiries from the world's major pharmaceutical and healthcare companies, some of whom had no previous contact with Israel."
"Even before the emergence of digital health," he says, "companies like Medtronic, J&J, GE Healthcare and Philips Healthcare had major operations here. Now the big pharma companies are also arriving and the future looks very bright."