Denali Ventures - In The News

Denali Ventures Has $50 M Life Sciences Fund Early $1 M Investment in ESC Yielded $100 M

Denali VPs Yael Margolin and Ron Ginor will oversee the investment of remaining $10 M in portfolio that already includes Collgard, D-Pharm and Intelligene.

Dunn and Bradstreet recently ranked Denali Ventures as Israel’s largest VC fund dedicated to the life sciences industry, with resources of $50 million. Denali’s current fund follows MedMax Ventures, which in 1992 became the first pure life sciences fund in Israel and also one of the most successful, with an early investment of $1 million in ESC Medical (ESCM) yielding a return of more than $100 million. Today, Denali’s portfolio includes Collgard Biopharmaceuticals, D-Pharm, E&C Medical Intelligence, Gamida Cell, TransScan, Real-Time Radiography, Applied Spectral Imaging and Intelligene. “We generally make first and second round investments, although we have also made several follow-on investments in companies that originally received funding from MedMax, which was essentially a seed level fund” said Denali VP Dr. Yael Margolin. “Our average investment per company is around $3 million, which is often divided over two rounds.” Denali has about $10 Million dollars of uncommitted capital remaining, although the firm has made no new investments in the last quarter due to market conditions. Denali Vice Presidents Margolin and Dr. Ron Ginor emphasize that finding top-quality managers is a key challenge for Israeli biomedical companies and the placement of a strong management team tops the list of priorities at any company in which Denali invests. “In Europe and the United States, the huge pharmaceutical industry gives professionals a place to develop their skills and allows for the maturity of experienced managers, but in Israel the large company link is, in effect, missing,” Ginor said. To circumvent this problem for some of its portfolio companies, Denali has chosen a hybrid management model, in which management is centered in the US or Europe, and R&D activity is concentrated in Israel. “The model is viable only when you are directing a strong and independent R&D team in Israel, without the need for a CEO to be on site every day,” Margolin said. “A great example is at Real-Time Radiography, where Zeev Harel runs R&D in Jerusalem while CEO Don Korn, who was formerly a senior executive at Kodak, runs the strategic, logistical and business aspects from Florida. However, recruiting successful foreign managers to head Israeli companies isn’t easy, and it is impossible to overlook the fact that Don personally was very impressed by the company’s technology, which was crucial in recruiting him for this position.” A second example is at Intelligene, where the newly appointed CEO, Peter Lewis, is based in London. “Intelligene was looking for good therapeutic applications for their technology, and needed someone with a strong pharmaceutical background, which Peter brought in,” explains Noam Karstaedt, president of Denali Ventures and Chairman of the Board at Intelligene. E&C Medical Intelligence, with management centered in New Jersey and R&D in Jerusalem is quite advanced in terms of business development and sales. The company, which develops unique decision support software for the management of labor and delivery in hospitals, has already sold several of its $1 million systems in the United States. “The system has shown potential to significantly reduce malpractice risks in obstetrics, which generates the highest rate of medical malpractice suits in the United States,” Margolin said. Denali often plays the role of lead investor, doing due diligence, setting terms, and putting together investment rounds with both overseas and local VCs. “There are not enough VC dollars available in Israel for the long term support of biomedical companies, so we try to bring in US and European funds as well. Often times, they are able to participate in further investment rounds and to help in providing crucial industry contacts,” Margolin said. “In the case of Gamida Cell, for example, we brought in the French VC fund Auriga to facilitate clinical trials in Europe.” In working with other Israeli VCs, Ginor points out that there is more cooperation than is often the case in the U.S. “We rely upon one another for closing investment rounds, and we do not have adversarial relationships at all,” Ginor said. “Furthermore, no one Israeli VC is rich enough or egotistical enough to believe that it can take a product through Phase I and II clinical trials without some external or strategic support. I honestly think that we consult with other local investors and experts regarding business and regulatory decisions on a daily basis.” According to Ginor, it is important to recognize that the management requirements of a company change depending upon its development stage. “The management team of an early stage company must have three specific capabilities, including the ability to drive the R&D team, communicate technology in a professional manner when raising seed funding, and sign joint development efforts. However, managers of later stage companies must be able to recruit a significant amount of funds, interact well with investors, banks, and regulatory bodies, and, in essence, have the capability to run a publicly listed and highly scrutinized company.” Denali was founded in 1998 with the backing of private US investors. The management team takes specific pride in offering investors and entrepreneurs a diverse body of academic and industrial expertise in medical technologies and products. Ginor, who holds a degree in international economics and a medical degree from The George Washington University, came to Denali in early 2000, after working as Director of Clinical Development at Medinol and a consultant to a number of leading medical device companies. At Denali, Ginor oversees investments in medical devices, imaging modalities, and health information systems. Yael Margolin holds a doctorate from the Weizmann Institute in biochemistry and performed her post doctorate work in reproductive endocrinology at the Yale University School of Medicine. She also spent seven years at Teva focusing on new drug development programs. At Denali, Dr. Margolin manages pharmaceutical, biotechnology and drug delivery system investments. Denali’s President, Noam Karstaedt, established Israel’s first pure biomedical and health care technology fund, MedMax Ventures, in 1992. Karstaedt holds a Masters degree in Applied Mathematics and Engineering from Witwatersrand University in South Africa and an MBA from the Graduate School of Business at Stanford University. He worked as a strategic consultant for Booz Allen & Hamilton in San Francisco. Noam is an expert on business model development and strategic growth, and plays an active role in every investment. Ginor sees Israel as a fertile ground for entrepreneurial activity, citing a local culture that respects risk-taking, a well-educated local population and an aggressive outward looking economic approach as key drivers. However, the political situation has had its effect on investment in an otherwise welcoming investment environment. “Overseas investors inquire about the effects of the political situation, but it really has not been deal breaker as far as investment is concerned. However, it is fair to say that the economic and political climate have conspired to make all investors more cautious these days,” Ginor said. Copyright Source: BioIsrael.com, 2001.