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Breakthrough Dividend: Chapter 22 - Toward the Future: Recommendations

Although the primary purpose of this report was to provide an introduction to biotechnology in Israel, as a long-time consultant, I cannot resist making a few personal observations and recommendations. Most have already been implicitly incorporated into the text itself and are extracted here for convenience. I lay no claim to originality, prophecy or completeness; but, hopefully, the following will be useful as one observer's common-sense response to the (sometimes limited) data at hand. The first six relate to assuring good U.S.-Israeli strategic partnerships in biotechnology, in which mutual benefit and realistic expectations crucial for long-term success. The second five relate to how Israel, with proper help, can become more effective in putting its tremendous biotech potential to work for both itself and America.

1. Success is in the details.

Biotechnology is now suffering the results of having oversold itself. Hype is fine to get people interested, but participants should get down to actual cases, quantitative estimates and concrete comparisons (just how much better?) as soon as possible.

2. Success will be long-term and non-linear.

With a few exceptions (maybe diagnostics), biotechnology is a long-term investment. Given the world's needs -- health, food, energy -- and biotechnology's unquestioned capabilities, ultimate success seems assured, but how long will it take? Cash-flow problems and investor fickleness make it hard to weather the storms without stable and patient backing.

3. Make sure the market has caught up to the technology.

You have to sell to consumers to make a profit. Consumers can be irrational, but they make the decisions and pay the bills. Thus, despite the technical excellence of many biotech products, especially recognizable food products (e.g., transgenic tomatoes) -- the market may at first be unready or even hostile. Education, advertising, familiarity and time can change public perceptions, but how long (and how much money) will that take? In such cases, I often advise: Why not be the second big success in that area?

Sometimes the same techniques can be applied elsewhere, where resistance is less: in unidentifiable food ingredients (e.g., sweeteners, flour), in non-food products (e.g., detergents, dyes, chemicals), in guiding conventional breeding programs, in "pharming" medically-important human proteins and drugs in plants, and so on.

4. Avoid "magnificent obsessions" and maintain a broad view.

Scientists often become highly attached to one highly-specific approach, system or product. Given the risky nature of high-tech R&D, over-specialization can lead to big losses, perhaps even dissolution, when product X just doesn't pan out. Instead, concentrate on technologies which, while specific enough for cost-effective development, have a variety of potential applications (Xenograft is a typical example), or bundle several narrower opportunities together. A corollary of this is that American firms visiting Israel, even if their primary motive is to check out a particular biotech idea or product, should take in as many other meetings, ideas and exposures as possible. Periodic "fishing expeditions" are an even better idea.

5. Don't forget the universities.

Israel is not America. Many, if not most, successful Israeli biotech products began in university research laboratories, industrial R&D is limited (and often is contracted out to universities), and the university commercialization units, especially the bigger ones, are well-equipped to keep you informed on what's happening. Although Israeli universities properly decry the need to sell their technology at comparatively low prices "before its time" (Chapter 20), there is little doubt that careful foreign investors can do exceptionally well at this level. U.S. companies are not always used to working with universities, but it can pay. Furthermore, it provides a useful glance ahead. For example, companies unwilling to invest at such a preliminary stage could simply identify interesting projects and check every so often on the spinoff companies formed to develop them, forming a strategic partnership at a later, less-risky (but less profitable) stage.

6. Israel and the U.S. are natural partners.

The potential for mutual benefit in U.S.-Israeli strategic partnerships is particularly high. The U.S. partner can contribute not only financial support, but also crucial management and marketing skills (and market access) which are only beginning to be developed in Israel. In addition to innovative technologies, Israelis can contribute highly-skilled, highly-motivated, moderately-priced manpower, free-trade agreement entry into European markets and accelerated clinical trials. Each can give the other a crucial edge, both at home and abroad. The U.S.-Israel Biotechnology Council and similar groups should be encouraged to help U.S. and Israeli businessmen make the crucial initial contacts.

7. Israel needs a Biotechnology Innovation-Development (BID) Fund.

There is a weak, but crucial link in Israel's laboratory-to-market chain. University commercialization units identify promising research project results and provide limited "packaging" and patent assistance. Existing institutions (the MIT, BIRD, etc.) can handle existing companies and their foreign strategic partners, although in practice, these seem to rarely involve biotechnology. What is particularly needed are comparatively small amounts of "seed money" ($10,000-$100,000) -- which universities and small entrepreneurs often lack -- to do further feasibility studies, preliminary clinical and scaleup trials, patent and literature searches, etc. Such pre-commercialization and pre-licensing inputs would have a particularly high marginal impact, bringing Israel (and its partners) high incremental benefits at minimal cost. Every effort should be made to secure the required $1-2 million from all possible funding sources in the U.S. and Israel.

8. Israel needs more Precompetitive Industrial Research Centers (PIRC).

Israel needs more on-campus facilities that bridge the gap between academic and industrial interests and needs. Process engineering and related fields need more emphasis, status, funding and facilities on campus. The pre-licensing feasibility and scaleup studies and academia/industry linkages discussed in Recommendations 7 and 9 need facilities for their implementation. These and similar goals could be met by special PIRC's, similar to the Hebrew University's Biotechnology-Fermentation Lab, but broader in scope. Such centers could also have a major impact on career choices and biotech manpower development.

9. Israel should help bridge the gap between industry and academia.

One can understand why Israel has not implemented many of the expensive, if worthwhile, recommendations of the Katzir Report. Funds were not available in existing budgets and special government allocations were not forthcoming. There is, however, no good reason why many of its other low-cost or no-cost recommendations, especially those designed to break down the barriers between academia and industry, cannot be implemented. These include: joint academic-industrial appointments and research laboratories, incentives for academic researchers to spend their sabbaticals in industry and vice versa, joint academic/industrial symposia and publications, guest-lecturer programs bringing industrial researchers to academia and vice versa, and so on.

10. Israel should help set up the Contract Research Organizations (CRO) and Clinical Research Associate (CRA) training programs required to meet the FDA's Good Clinical Practices (GCP) regulations.

This is discussed in some detail in Chapter 21. The result could be unique opportunities for Israel's tens of thousands of doctors and nurses, thousands of clinics and other medical institutions. Given Israel's rapid patient-sign-up and low patient-dropout rates, it could also represent a unique opportunity and competitive edge for American drug companies. The pharmaceutical testing industry could itself be worth hundreds of millions of dollars if the appropriate U.S.-style structures can be reliably established, and if the frequency of FDA inspections in Israel can be increased (next recommendation). The $1-2 million fund required to get things started should be an urgent priority of friends of Israeli industry in Israel and abroad. The fund could well be a revolving one (with 120% payback), and could insist that senior management take part of their salary in stock to ensure that they have a vital, concrete stake in the CRO's future.

11. Israel should move to increase the FDA's confidence in Israel's clinical results and the frequency of its inspections in Israel.

As mentioned in Chapter 21, one way to do this -- beyond setting up reliable CRO's with well-trained CRA's -- is to offer "equal rights for equal responsibilities," a sort of earned favored-nation status. In particular, Israel should offer unannounced on-the-spot inspections in exchange for more frequent inspections (crucial to Israel capitalizing on the rapidity with which it can do clinical trials). The U.S. Congress should be encouraged to increase the FDA's foreign inspection budget for this purpose, at least on a trial basis, if necessary. Such a U.S. and Israeli relationship would be mutually beneficial.