Digital health ecosystem in Israel

Israel is considered to be one of the most innovative countries in the world. It has one of the best-established startup ecosystems and is considered a pioneer in the technology industry.

Israel has also made great strides in establishing itself as a leading innovator in the digital health space. With around 400 companies in digital health, strong life sciences and medical research support from academic and medical institutions, favourable government policies and availability of generous funding from incubators, accelerators and venture capital firms, Israel has become a powerhouse in the digital health space. Leading global companies have lined up in Israel to take advantage of its innovation prowess in the healthcare space.

Israeli healthcare startups are going global and creating innovative products to address healthcare challenges across the world. The increasing size of the digital health ecosystem in Israel is backed by investors worldwide, including Chinese investors, who are eyeing Israel to solve their nation’s healthcare problems, and leading life sciences companies from western countries such as the US, which are making Israel a hotbed for their innovation pursuits.

Industry overview – size and growth rate

According to a recent report by Start-Up Nation, investments in this sector grew around 30% in 2016 to $183m, with over 70% being grabbed by personal health tools and health analytics companies alone. A total of 56% of digital health companies in this nation are still at the seed or R&D stage, which suggests the country is sitting on a mine of opportunities and innovation.

Image courtesy of Start-Up Nation Central

According to the Times of Israel, there are around 1,350 active life sciences companies in Israel, out of which 612 were found between 2007 and 2016. A total of 20% of all investments in high tech went to the healthcare sector alone in 2016.

Industry overview – focus areas

The health analytics sector is the prime beneficiary of funding in the past couple of years, garnering 59% and 32% of total funding received in 2015 and 2016 respectively. The clinical workflow sector also received funding to the tune of $55m in 2016. Another notable sector was wearables and sensors which commanded 25% of total investments in 2016.

Digital health companies in Israel have become highly focused on empowering patients, resulting in strong growth of companies offering personal health tools. As a result, 65% of companies are either following a business-to-consumer or business-to-business-to-consumer business model. Health analytics technology has become the core of such companies offering personal health tools.

The clinical workflow sector has displayed muted growth and has remained relatively stable. Even though Israel’s capability in this area is one of the most advanced in the world, a possible reason for such slow growth is that such products are customised as per the specific needs of healthcare institutions which vary greatly across different markets and hence, adaptation of such products across markets becomes challenging.

Upcoming startups

Leading startups across different digital health categories in Israel are making waves across the globe. For example, E-Shunt is a startup that has developed an innovative solution for treating glaucoma by developing an implant that stops the progress of the disease. Nutrino Health is a company that focuses on treating diabetes by leveraging big data technologies. The company makes use of data collected via wearables, sensors and medical devices and has created a digital signature of foodstuffs.

Insulog is a player in the connected insulin pen space that has developed a pen cap for disposable insulin pens to support adherence. TilTalk2Me is a digital health startup that has combined gaming with speech therapy and voice recognition technology. Allerguard has developed a personalised allergen hazard sensor to assist people with food allergies. Tytocare has devised a platform to enable remote examination and consultation with a doctor. EarlySense has raised $25m to develop contract-free sleep monitors in collaboration with Samsung.

Funding scene

Several startups have secured a large volume of funding in 2016, such as real-time patient care advice platform MedCPU ($35m), healthcare sector-focused payment software developer Simplee ($20m), preventative health screening services and disease risk management provider HealthWatch ($20m), artificial intelligence wearables developer LifeBeam ($20m), and medical imaging platform Zebra Medical Vision ($12m).

Most of the VC investments flowing into digital health startups occur at the seed stage, displaying the risk appetite and confidence of global investors in the quality of healthcare startups in Israel. It is also notable that even though companies focused on personal health tools have garnered a major portion of early-stage funding, almost 80% of these companies have fully developed products. Rapidly growing sectors, such as healthcare analytics and personal health tools, are observing major gaps in terms of product stage funding. These companies need to overcome complex challenges pertaining to product market fit across international markets, regulatory challenges and clinical validation and value before they can reap the benefits of their hard work and innovation.

Incubators, accelerators and investors

Israel has one of the most extensive incubator and accelerator networks for technology startups in the world and digital health is no exception. There are a myriad healthcare-focused incubators and accelerators propelling the growth of digital health startups. Some of these are backed by global healthcare, pharmaceutical and medical device companies that aim to leverage the strong digital health ecosystem of Israel.

eHealth Ventures is one of the leading digital health incubators backed by Israel’s health maintenance organisation Maccabi, medical centre Cleveland Clinic, biotech firm Amgen, pharmaceutical company Medison and Chinese VC fund SCI.

Mindup is another leading digital health incubator, backed by technology company IBM, medical equipment manufactuer Medtronic, medical services provider Rambam Medical Centre, that has a collaboration with the Israel Innovation Authority. Its investment focus includes big data, predictive analytics, telemedicine, cloud computing, wearable and implantable sensors, advanced point of care diagnostics, personalised medicine, genomic analysis and hospital IT systems.

Healthcare company Johnson & Johnson started a biotech accelerator with investment firm OrbiMed Israel and pharmaceutical firm Takeda Pharmaceuticals known as FutuRx. Pharmaceutical firm Teva and electronics business Philips started Sanara Ventures to back innovative healthcare technology companies.

IBM has launched an accelerator called IBM Alpha Zone to promote digital health companies. Software developer Microsoft backs digital health startups through its Microsoft Ventures arm along with other multinational investors such as pharmaceutical firm Merck and conglomerate General Electric.

A host of venture capital firms are active in the digital health space, such as Pitango, Pontifax, Arkin, LionBird, Orbimed and Triventures. In addition, there are newer entrants who are showing a keen interest in investing in digital health companies. Elevator is one such fund that now focuses on investment in the digital health space.

OurCrowd, an equity crowdfunding platform in Jerusa
lem is another digital health-focused fund that collaborates with Johns Hopkins University to invest in early-stage startups. Samsung Runway is an accelerator based in consumer electronics producer Samsung’s R&D centre in Israel and focuses on mobile health companies.

MedXelerator is an accelerator backed by medical device maker Boston Scientific, commercialisation firm Intellectual Ventures, accelerator MedX Ventures and hospital Sheba Medical Centre, focused on medical device and digital health companies.

Other active incubators and accelerators include Alon MedTech Ventures, Next Generation Technology, Rad BioMed Accelerator and Trendlines Medical Misgav Venture.

Chinese authorities are also looking at Israel keenly for innovative digital health solutions and Israeli startups are attracting large investments from China-based investors.

Academic research infrastructure

Israel possesses a strong academic infrastructure for fostering innovation in life sciences. One in three Israeli scientists specialises in life sciences. The sector comprises about 50% of Israeli civilian research activities in its seven universities, 10 research institutes and five medical schools. A large number of world-class academic and medical institutions in Israel are working towards fostering the growth of medical innovation.

Leading medical institutions include Jerusalem’s Hadassah Hospital, the Rambam Hospital in Haifa, Tel Aviv’s Ichilov Hospital and the Chaim Sheba Medical Center.

Leading academic institutions include Tel Aviv University, Weizmann Institute of Science, Technion–Israel Institute of Technology and Hebrew University. These institutions publish a large number of scientific papers, file the largest number of medical device patents in the world on per capita basis and have active technology transfer offices for commercialisation of digital health inventions.

Recently, pharmaceutical firm Baxter International and Tel Aviv University’s tech transfer office Ramot announced joint research initiatives for evaluating new innovative healthcare technologies being developed at the university as well as Tel Aviv Sourasky Medical Centre. Such collaborations between industry and academia emphasises the quality of academic research in healthcare at Israel’s leading institutions.

Universities have also played a major role in the commercialisation of innovations in Israel. Commercialisation companies were involved in setting up 53 startups in 2015, of which 85% were located near universities.

Government support

Digital health is one of the fastest-growing lucrative and dynamic industries for Israel’s government. The Israel Innovation Authority (IIA) has been a major catalyst for the development of this sector by devoting 25% of its budget to the life sciences sector from 2005 to 2014. In the past decade, the IIA has invested more than $100m annually in the healthcare sector through its various programs. In addition, overseas companies investing in Israel enjoy one of the lowest corporate tax rates at 8%. Eligible companies that choose to build facilities can even enjoy a 30% investment grant for R&D spending and employee costs.

The Israeli Ministry of Health has laid out a strategy to integrate innovative digital health technologies in the public health ecosystem by launching three challenge tenders aimed at enhancing the efficiency of hospital and emergency care, tackling obesity and reducing medical errors. These tenders are a stepping stone for the startups to take part in government initiatives and marks a new beginning in the relationship between the Ministry of Health and the startup ecosystem.

Market map

Future prospects

The healthcare environment across the globe is rapidly transforming owing to an ageing population, a changing regulatory climate and new technology innovations that promise better quality and access to patients across the globe. In such a disruptive environment, Israel is well poised to become a global powerhouse in the digital health industry due to its strong startup ecosystem, excellent research infrastructure and talent and dedicated efforts by the government to boost the healthcare sector.

References

Israel21c: Start-Up Nation report finds explosive growth of digital health in Israel

The Times of Israel: Futuristic health tech on display at biomed conference in Tel Aviv

The Times of Israel: Israel is helping lead the global transition to digital healthcare

Startup Nation Central Digital Health Report 2016

– This is an edited version of a post that first appeared on LinkedIn. It has been republished with permission from the author.