Investing in Israeli Digital Health Companies

Listeners will learn about how connected health companies navigate clinical trials, group purchasing organizations and the reimbursement landscapes.

We discuss how these companies protect their secret sauce, the importance of predicates and crucial tips on receiving capital from strategic investors. Light is shed on how connected health companies impact malpractice risks, benefit from local regulations and should seek a trade-off in terms of efficiency and bedside manner.

Listen to Levy Shapiro and Goel Jasper discuss some of Israel’s most promising digital health companies. Among the companies discussed are Biotax, Sweetch, and Theranica.

Levi Shapiro Founder, mHealth Israel

Founder, mHealth Israel: Non-profit supporting Israel’s connected health and medtech community, with 8000+ participants. Efforts include a mix of online and offline educational efforts, multinational advisory, etc.

Goel Jasper, Digital Health Innovation Group Lead at FINN Partners

– Seasoned PR/marketing professional
– Agency and client-side experience
– Strategic counselor to executives
– Experienced media trainer
– Story/message development

Investing

Medical Devices

mHealth Israel, FINN Partners

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SHOW NOTES:

00:00:59 – When valuations are lower is a great opportunity

Israel has a large pool of technical talent, and that technical talent is more and more focusing on addressing US healthcare challenges. And I run a nonprofit community and Health Israel, which is elevating the overall level of Israel’s health tech innovator community to continue solving those challenges.

The number of companies continues to grow from about 110 connected health companies eight years ago. Now that number is about 638. The amount of capital has grown, yes. A couple of sources for that data. In the macro, the fundraising has been terrific. It’s about six or seven X larger than it was eight years ago.

From my side, I’ve been not only a community builder, but also an investor, and I’m a managing partner in a fund called Pragmata VC, looking across biotech device, digital health, and healthcare adjacent like supply chain. And really, this moment when valuations are lower is a great opportunity. I think it’s a really good time for innovation and focusing on the basics, which is revenue, gotomarket clear reimbursement strategies. And I’m sure Goell can talk much more about success in that area.

00:09:48 – And one of the important things that we’re pitching to the companies also is basically having them set up a donor-advised fund.

when valuations are lower is a great opportunity

00:28:23 – In the event of an IPO, the shareholders are often locked up for six months before you can sell shares.

Technically, in the event of an M and A, if there’s a merger acquisition, basically the exit is a one-time event. So any options that we have, we don’t have to invest any money to receive the return on our options because it’s a back-to-back transaction. However, if there’s an IPO scenario.

So what might happen is we’d have to exercise our options, perhaps put out cash. But then in the event of an IPO, the shareholders are often locked up for six months before you can sell shares. And we wouldn’t want to be in a position where we put money out up front, sold our share six months later for perhaps less than we put out upfront.

And in that sort of scenario, what we say is, okay, let’s say we have an option to purchase 100 shares. I’m only going to use that option to purchase 90 shares. And the ten that I’m reneging on will cover the cost of what I would have had to put out to exercise. And that way, again, we don’t put any funds at risk of the foundation.

00:34:47 – The drug discovery process typically outsources the clinical trials, and they do that with clinical research organizations

Were not equipped to meet the moment. And so the companies that interest me most as a result of the pandemic are undertaking truly transformational change rather than a simple, cheaper, better, faster transformational change.

That includes the Internet of Biological Things. The Internet of Biological Things means not just it, but it meets biology and provides better treatment than one or the other. So, for example, moving care to the home, there’s a home dialysis product called Liberty L-I-B-E-R-D-I-I think is terrific. Moving OSA sleep apnea to the home.

A company here called Etamar Medical managed to get the first reimbursement, payment, coverage and coding in December 2019, and therefore timed the market perfectly, which allowed them to not only increase their market cap, but ultimately get acquired by a company called Zoll. And so moving health out of the clinic and into the home, I think is a great opportunity. And addressing those, let’s say, core fundamental problems.

Right now, we don’t have enough nursing staff. So I’ve seen a company that’s like an Uber not necessarily for nursing staff, but for clinical research. The drug discovery process typically outsources the clinical trials, and they do that with clinical research organizations and Uber meets indeed, for clinical research analysts to access that talent pool and maintain that talent pool throughout their career..

00:40:16 – Many people in the world of Israel health innovation come from the tech world.

I would start by saying that most Israeli health innovators, whether in the world of biotech, the world of devices, or the world of digital health, they start their business focused on markets outside of Israel.

So it’s pretty rare that a company will try to conquer Israel first and then move to other countries. I just think the other countries have larger markets, larger potential for the growth of the business. So they begin with that as their focus. Having said that, many people in the world of Israel health innovation come from the tech world. And as you know, in the tech world, the paradigm is sort of if you build it, they will come create the product or create the app or create the software and start selling it.

And in the world of health, obviously, it’s different. And I think that many of these entrepreneurs sort of learn as they’re going that acceptance of health innovation is a much longer process, as lady mentioned before, and eventually they get with the program. But there can be some frustration along the way. So what we really try to do. And Livi hinted at this as well..

00:48:46 –  I do think it’s valuable to go to people who are experts in the market that you’re trying to reach and receive their counsel.

I think if we can think again about the fact that many of these companies are not securing $50 million rounds, $100 million rounds of funding. Sometimes it’s 6 million, 7 million.

They want to make sure that they’re protecting their capital. I hope they do. And in that context, there are consultants based in the States who can be very helpful in that respect. And we’re a big fan of certain ones. And I think it would be a good move for some of these companies to go that route. Of course, as a consultant myself.

Maybe I’m biased, but I do think it’s valuable to go to people who are experts in the market that you’re trying to reach and receive their counsel. And also a faster pathway to reimbursement and codes can really result from that kind of relationship.

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