Through an innovative partnership with an Israeli technology incubator, Akron venture capital firm Everett Partners is hoping to bring several medical device firms’ U.S. headquarters to Northeast Ohio.
While no startups from the Targatech Innovation Center in Netanya, Israel have set up shop in Akron yet, that could change as soon as the next few months, said Neil Wyant, a managing director with Everett. The venture firm was set up to be the investment vehicle of the Kanfer family, which is behind hygiene company GoJo Industries, maker of the Purell hand sanitizer.
The ideal company for Everett to import to Northeast Ohio would be one that can take advantage of the region’s various strengths in healthcare by establishing partnerships with local hospitals or clinicians and recruiting new employees from the local talent pool, Wyant said. After a period of incubation and business development in Israel, the companies would set up their U.S. headquarters in Northeast Ohio.
The model is somewhat similar to Cleveland venture firm Bridge Investment Fund, which also targets Israeli device firms with an eye toward luring its portfolio companies to the region. However, as the executives behind Bridge and Everett stress, their main focus is on investor returns with economic development concerns, such as local job creation, a secondary priority.
Bridge recently scored a victory when portfolio company IceCure Medical announced plans to set up its U.S. operations in Cleveland.
Wyant listed orthopedics, neurostimulation and cardiovascular as therapeutic areas of strength for Northeast Ohio. Within those therapeutic areas, Everett generally focuses on minimally invasive, software-enabled device companies, Wyant said.
Here’s how Everrett’s partnership with the Targetech incubator works: Each Israeli company gets about $500,000 in startup costs to cover roughly two years of operations. The Israeli government picks up 85 percent of that tab through the Office of the Chief Scientist, which supports technology research and development.
A Deep-dive Into Specialty Pharma
A specialty drug is a class of prescription medications used to treat complex, chronic or rare medical conditions. Although this classification was originally intended to define the treatment of rare, also termed “orphan” diseases, affecting fewer than 200,000 people in the US, more recently, specialty drugs have emerged as the cornerstone of treatment for chronic and complex diseases such as cancer, autoimmune conditions, diabetes, hepatitis C, and HIV/AIDS.
The remaining 15 percent of the bill is footed by Targatech’s shareholders — Everett and other investors — who also pay about $165,000 in annual overhead costs for each company. The investors then receives half of each company’s equity. That arrangement began is 2009 and lasts for three years.
Targatech investors essentially have the exclusive right to buy half the equity in any company that enters the incubator over that time period. Eight companies are currently operating out of the incubator and Targatech expects the number to grow to 15 during the time period.
The low-cost model allows Everett to get a good look at emerging Israeli technologies and assess what their U.S. market potential might be, according to Wyant.
“The advantage of our model is that it leverages the strategic assets in the region and where they overlap with our pipeline of Israeli opportunities,” he said. “This helps us drive our [internal rate of return] by being more efficient with our capital and improving our time to market.”
The following is a list of a few Targetech portfolio companies:
- Nervomatrix: This company is developing an image-guided nerve-stimulation device for the treatment of back pain. The company already has a leg up on a U.S. move and has obtained 510(k) regulatory clearance from the U.S. Food and Drug Administration to begin commercializing the device in the country.
- Intramed Systems: An orthopedics company, Intramed is developing limb reconstruction and elongation devices. The company’s technology is designed for use in surgeries to correct limb injuries, congenital defects and “certain kinds of dwarfism.”
- NewVert: This company is developing an implant that’s aimed at preventing re-herniation, a complication that can occur after a patient has surgery to repair a herniated, or ruptured, spinal disc.
- GI Motions: This startup is developing a device that can be attached to an endoscope to enable the instrument to access previously “inapproachable” segments of the gastrointestinal tract.
