Software to Healthcare: Israeli innovation disrupts medicine

Hardware, software, and now healthcare can be added to the list of innovation that Israeli companies are exporting abroad. Technology has disrupted healthcare, and new startups are seizing the opportunity – estimated to be a $740 billion global market.

‘There is a gap between large life sciences companies and smaller companies that develop innovative technologies,’ says Levi Shapiro, a partner in Veritas Venture Partners who is also leading the mHealth conference this Monday in Jerusalem.

‘Large companies excel in management and implementation, while smaller companies are nimble and highly specialised.’ Yet unlike internet giants, which regularly buy out early stage startups (perhaps because not so long ago they too were early stage startups), healthcare and pharmaceutical companies do not normally meet with young companies. ‘They speak a different language,’ says Shapiro. Drug makers, doctors, and insurers are inherently risk averse. Startups are not. ‘But therein lies the opportunity,’ say Shapiro. And the data supports it.

Levi Shapiro, General Partner, Digital Health Fund, Veritas Venture Partners

According to the research firm IVC, Israeli startups raised a total of $994 million in the first quarter of 2015, 22% of which went into life science companies. That’s not to mention the nine Israeli health companies that listed on the Nasdaq last year. Macrocure, which has since doubled its share price, has developed advanced wound care that is nearing FDA approval. Meanwhile, Lumenis had a stellar run until just last week, when the Hong Kong fund XIO acquired the medical laser company for $510 million.

Additionally, Samsung recently invested $10 million in Earlysense, a patient monitoring system that tracks heart and respiratory functions with a thin device that is embedded into patient mattresses. Israeli VC fund Pitango Venture Capital also invested in the company, along with Japanese financial conglomerate Mitsui & Co.

https://www.youtube.com/watch?v=cyv4DalCh38
CEO of Samsung Electronics, Boo-Keun Yoon presented EarlySense at the Consumer Electronics Show in Las Vegas.

The growing interest in Israeli healthcare companies stems in large part from an aging population, particularly in Japan and China, says Shapiro. 22% of the Japanese population is over the age of 65, a figure that Mckinsey reported could rise to 40% by 2050. ‘Advances in treatment are increasing the cost of care, and the system’s funding mechanisms just cannot cope,’ the authors of the report said.

In China, as the younger generation leaves the countryside for cities, the elderly population are less likely to remain near their children. Furthermore, the one-child policy will result in ‘a larger fraction of parents who will not have access to an adult child,’ said Professor Yaohui Zhao in a recent Rand report. ‘That’s not a crisis of the moment, but a potential crisis of the future.’ In 1950, the life expectancy in China was about 40 years old. Today, it’s about 70, ‘with every indication the trend toward longer life will continue,’ the report concluded. These shifting demographics will create business opportunities for pharmaceuticals, health care providers, and insurance companies, and given the increased level of Chinese investment across sectors in Israel, Shapiro sees no reason why the trend shouldn’t extend into the life sciences.

Prime Minister Benjamin Netanyahu and Liu Yandong, Vice Premier of the People’s Republic of China, seen at a joint press conference at Prime Minister Netanyahu’s office in Jerusalem. May 19, 2014. (Photo credit: Emil Salman/POOL/Flash90)

Among the 200-odd new Israeli companies in the space, many of them are developing technology that could benefit an aging population. Telesofia has developed a platform for sending patients customised videos that explain how they should take their medications. Meanwhile MediSafe has raised $6 million for its mobile app that reminds patients when and how to take their medication, and alerts family members and care takers when a dose is missed. Most impressively, the data gathered by the app relays back to doctors. Medication adherence is a growing concern, particularly in the US, where it’s estimated that 50% of Americans don’t take their medication as prescribed – a problem that costs the US health system between $100 – $300 billion, annually.

Beyond individual products, Israel has also developed a world class healthcare model. One of the first OECD countries to switch to electronic health records some 20 years ago, Israel has since developed advanced integrated digital health platforms which according to the OECD, ‘sets an international benchmark in excellence.’

Israeli healthcare startups are likely to follow suit.