from the February 2009 issue

2008 Summary of Israeli High-Tech Company Capital Raising

Israeli high-tech capital raising in 2008 reaches $2.08 billion - highest in eight years

First Investments by Israeli VCs declining
This Survey reviews capital raised by private Israeli high-tech companies from Israeli venture capital funds and from other investors. The Survey is based on reports from 82 venture investors of which 48 are Israeli management companies and 34 are other - mostly foreign - investment entities. In 2008, 483 Israeli high-tech companies raised $2.08 billion from local and foreign venture investors, 18 percent above the $1.76 billion raised in 2007 and 28 percent above 2006 levels.

"While 2008 was an exceptional year for capital raising" said Zeev Holtzman, Chairman of IVC Research Center and Giza Venture Capital, "the global recession cannot be ignored. In the upcoming year investments in Israeli high-tech companies will undoubtedly be lower." Holtzman nevertheless remains optimistic regarding Israeli high technology as a whole: "2009 will be a tough year for all companies, maintains Holtzman, "yet Israeli high-tech industry will continue to be a highly abundant source of technology innovation."

In the fourth quarter, 109 Israeli high-tech companies raised $394 million - 22 percent below the $503 million raised in the fourth quarter of 2007, and 34 percent below the $600 million raised in the previous quarter - the highest third quarter reported in the last eight years.

The average financing round was $3.61 million, compared to $4.37 million in the fourth quarter of 2007 and $4.83 million in the previous quarter.

Seventy-six companies attracted more than $1 million each. Of these, 18 companies raised $5 million to $10 million each, nine companies raised $10 million to $20 million, and one company raised over $20 million.

Israeli VC Investment Activity
In 2008, Israeli VCs invested $780 million in Israeli high-tech companies, 38 percent of the total amount invested in Israeli high-tech companies. This compared to $678 million or 39 percent in 2007 and $651 million or 40 percent in 2006.

In the fourth quarter, Israeli VCs invested $151 million, which accounted for a 38 percent share of the total invested in Israeli high-tech companies. The remainder came from foreign investors as well as non-VC Israeli investors.

In 2008, First investments made by Israeli VCs were 31 percent of the total amount invested by Israeli VCs, compared to 43 percent in 2007. The average First and Follow-on investments in 2008 were $2.6 million and $1.15 million, respectively. Israeli VC Activity in Foreign Companies Israeli VCs invested $57 million in companies outside Israel during 2008 (in addition to their investments in Israeli high-tech companies), compared to $50 million in 2007 and $60 million in 2006. Eleven of the 33 investments were First investments and the remainder were Follow-ons.

Capital Raised by Sector
In 2008, the Communications sector led capital raising with $516 million or 25 percent of total capital raised, followed by Software with $407 million or 20 percent and the Semiconductors sector with $323 million or 16 percent of total capital raised. Internet firms continued to attract investor attention with 14 percent of capital raised in 2008 and 15 percent in 2007. In the last two years, Internet investment has soared from the minute levels of the preceding few years.

Capital Raised by Stage
In 2008, 70 Seed companies attracted $104 million or 5 percent of capital raised. The Seed company share of capital raised was well below the 8 percent average of the previous four years.

Stryker Corp. to launch world's first wireless HD surgical monitor Stryker Corp.'s endoscopy division will use technology developed by an Israeli company to launch the world's first wireless, high-definition monitor used in surgeries.

The Kalamazoo-based medical device maker's new HDTV surgical monitor will use wireless technology from Amimon Inc.

"Only AMIMON's High-Definition Wireless Technology is capable of transmitting the surgical video with no perceptible lag or interference throughout the entire operating room," William Chang, Stryker Endoscopy's vice president of research & development, said in a written statement. "This will allow surgeons greater flexibility in positioning the surgical display while operating."

Chang also said eliminating wires will save hospitals and surgery centers the cost of routing cables through ceilings and booms that hold the display equipment.

Amimon is a venture-backed startup company headquartered in Herzlia, Israel, with offices in Santa Clara, Calif. and Tokyo.

Earlier this month, Stryker said it would incur a $20 million charge this year in part to "substantially reduce its development efforts associated with" SightLine Technologies, an Israeli startup it acquired in 2006. SightLine was working on commercializing flexible endoscopy technology used in colonoscopies and other gastrointestinal surgeries.

TransPharma obtains European CE Mark approval for its Transdermal Drug Delivery
TransPharma Medical Ltd., a specialty pharmaceutical company focused on the development and commercialization of drug products utilizing a proprietary active transdermal drug delivery technology, announced today that it received European CE Mark approval for its ViaDerm, a transdermal drug delivery device. "We are excited about receiving the European CE approval for our unique ViaDerm device. This achievement confirms the safety of the ViaDerm device and brings us closer to offering patients a method for the accurate delivery of biologics, thus avoiding the need for injections," said Dr. Daphna Heffetz, CEO of TransPharma Medical.

The device incorporates a reusable, battery-operated handheld electronic control unit and a disposable microelectrode array that together with a patch containing a drug comprises the ViaDerm System. Once applied to the skin, microscopic pores are created utilizing TransPharma's proprietary RF-MicroChannel technology, which are covered seamlessly with the patch. The drug is then diffused from the patch, through the microscopic passageways, into the skin's inner layers, and from there into the systemic circulation. The ViaDerm system provides a cost-effective, easy-to-use, self-administered solution that enables the safe, reproducible and accurate delivery of a broad range of product candidates, including hydrophilic small molecules peptides and proteins.

TransPharma has completed fourteen clinical studies with over 350 subjects, as well as numerous pre-clinical trials, demonstrating excellent skin tolerability and efficacious transdermal delivery of various sizes and types of drug-molecules. The Company's lead product is ViaDerm-hPTH (1-34), a transdermal hPTH (1-34) drug-product, for the treatment of osteoporosis, currently in Phase 2 clinical studies. This drug-product will enable patients to better manage their disease by eliminating the need for daily painful injections while easing handling and administration. In a recent collaboration, TransPharma out-licensed the ViaDerm-PTH (1-34) to Eli Lilly, and was granted, in return, an upfront payment of $35 million and may also receive development and sales milestones, as well as royalties on sales if the product is successfully commercialized.

We first wrote about Transpharma in the June 2003 issue

Reprinted from the Israel High-Tech & Investment Report February 2009

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