Billionaire philanthropist and prominent medical equipment entrepreneur Alfred Mann died in 2016. His legacy included diverse interests, but most of his attention in recent years was paid to MannKind Corporation, a developer of devices for treatment of diabetes. Before his death, Mann staged offerings for the company on both Nasdaq and the Tel Aviv Stock Exchange (TASE). In addition to this, however, he left behind him two groups for mentoring medical equipment startups that work according to interesting business models, and which are continuing to do so after his death.
Israel is now benefiting from one of these funds, the Mann Foundation for Biomedical Engineering, which manages two funds that encourage turning applied research into startups at two universities, one of which is the Technion Israel Institute of Technology, in which activity is incorporated in AMIT (the Alfred Mann Institute at the Technion). The second fund is not currently active in Israel, but it is certainly open to ideas for such activity. This fund has a unique model: development of medical equipment as a company for all intents and purposes, but on a non-profit basis. The amounts invested in the company's projects are significant, and they are later spun off, and become commercial companies. All the money received from them by the fund is invested in new projects. The fund's goal is therefore to invest in activity that will be commercially successful, but only if it will change the world. As a result, the projects are often ones that no other entities will undertake. This group is called the Alfred Mann Foundation (AMF).
David Hankin is CEO of both groups. "The AMF currently has 77 employees: scientists, engineers, doctors, and regulatory specialists," he explains. "The number of employees changes according to the volume of projects. For example, in recent years, we have spun off three projects, together with their teams, so we 'lost' people, whom we will hire back when these projects achieve exits, and then we will also have the money to rehire those people. We currently manage $85 million, and we believe that we will have exits that will increase the amount managed to $400 million in the next two or three years."
Helping the disabled walk
The main project that the foundation is now promoting (meaning that it has not yet been spun off) is a project to develop sensors implanted in amputees that will enable them to communicate with their prosthesis merely by thinking. The device, called infinity system, corresponds well with Mann's fields of interest during his lifetime - electrical stimulation in order to achieve seemingly impossible medical goals.
Previous companies of his restored sight and hearing to the blind and deaf through electrical stimulation, and the Infinity project is designed to help the disabled walk. Three companies have been spun off in the past year or two, from which the company is waiting for an exit. One is Axonics Modulation Technologies, which is developing a device to stimulate an overactive bladder.
"The product was developed initially to stimulate nerves for treatment of neuropathic pain," Hankin says, "in other words, pain originating in damage to the nerves themselves. The same platform, however, is relevant to different types of nerve stimulation, and the company decided to apply this to the bladder."
$52 million has already been raised for the independent company from venture capital funds in Europe and Asia since it was separated from the foundation. "The key question is when to spin off each company," Hankin says. "In this case, we did it at the prototype stage, because we found a suitable management team that was available after the sale of Vesex Vascular to Boston Scientific, and they were very curious about this product. In retrospect, it was an excellent decision to bring in this management team as a complete unit. They also managed to get the money. Right now, they are about to begin the clinical trial."
The second company is Monolythix, which started in the field of real-time diagnostic tests for infectious diseases for the underdeveloped world, but switched to DNA testing, and now makes it possible to isolate DNA quickly and accurately for the purpose of personalized medicine.
Sell and compete
The third product is a completely implanted morphine IV pump developed by Medallion Therapeutics. The company story is interesting, and also typical of Mann's activity.
"Around the turn of the millennium, Alfred Mann sold MiniMed, a medical pumps company, to Medtronic, and the intellectual property sold included the implanted pump. We assumed that Medtronic would probably not develop this, because it fired all the workers in that field. Al (Mann) hired all of them, and asked them to develop a pump that could do it better, without infringing the patent."
Such a product was developed, and was part of Advanced Bionics, which was sold to Boston Scientific. Following a legal battle, however, some of the company returned to Mann. A company was founded around the pump, and raised $40 million, but the product encountered technical difficulties and problems with the US Food and Drug Administration (FDA). Mann held an auction to sell it. "We, the foundation, took part in the auction, and bought the product. After six months, we fixed the two problems, and did the first clinical trial in the foundation's history. Towards the end of the trial, we spun the product off into Medallion."
The plan is to market the product to the morphine sector, where it will inevitably compete with Medtronic's product. "They have a good product in this market, because of which they did not develop our product when they recently acquired MiniMed. But we developed an improved competing product," Hankin says. This is not the only example in the Mann group of a product being sold, followed by the development of an improved product to compete with it.
The same is the case with new nerve stimulation product, described above as the foundation's current business focus. "We once had an electric nerve stimulation product at the foundation, which we licensed to Boston Scientific, and they didn't develop it. I decided that we needed our own platform in this sphere, and as soon as possible, and of course one that would not infringe the patents we sold to Boston Scientific. It always angers me when a big company sits on a collection of patents in an important area and does nothing with it, or doesn't develop it for the needs we could refer to them, because it's easier for us to take risks. So we bypass them.
"We have many more products that we can't talk about. We like to go for products that are very, very risky, which we can do, because we are a non-profit group. For example, we won't invest in self-improvement products without any medical benefit unless they solve a problem for people, and there is a real need for them," Hankin says.
Hankin wants to strengthen his ties with Israel. "We had a development team in Israel, but it was integrated into Bioness, one of Mann's group of companies. We think there's a lot of talent and innovation in Israel that no other country in our lifetime can compete with."
Printing stem cells
Hankin's second activity is managing activity in universities, including AMIT at the Technion. $30 million has been invested in AMIT to date. A $100 million investment was previously discussed, but the actual investment depends on the division of Mann's assets. "The goal is for the two funds to eventually be independent, and to need no further investments. Like the research fund, AMIT is also likely to achieve this within a short time. Within two-three years, there will be results there," Hankin predicts.
AMIT's best known activity to date is stem cells company Accellta, which has developed a new method of growing stem cells, and received an investment (amount unknown) from billionaire Li Ka Shing. Accelta recently also announced initial success in 3D printing of stem cells.
"This company has a rosy future," says Hankin. "They want to balance their cash flow as soon as possible." Another relatively well known activity is Sealantis, which has developed material for fusing tissue, based on a mechanism copied from seaweed. "This product has a great many possible applications, and it is necessary to be selective. It's a challenge for the management group right now," Hankin declares. Other interesting AMIT companies include Sanoculis, which has developed a drug for glacoma, and recently obtained an investment from an undisclosed private party, and Eximo Medical, in which Accelmed, a fund controlled by Dr. Uri Geiger and Mori Arkin, has invested.
"All these companies have received external validation. We believe that in the coming 2-3 years, we'll invest in 12 more new companies," Hankin says.
According to Technion Technology Transfer Office director Benny Soffer, "The Technion's support for this activity through a $10 million fund founded within our commercialization company shows our belief that universities in the new era must help create jobs for their graduates, and in general."
In addition to the funds and MannKind, the Alfred Mann group also includes Second Sight Medical Products, a Nasdaq-listed company, which is developing an implant to replace part of the eye's activity, enabling certain patients blinded by retina damage to partially regain their sight through electronic screening of images into the brain. The company's market cap is $165 million, and its revenue amounts to a mere $1 million. Bioness, which has developed systems for stimulating muscle nerves in order to teach them to move again, even if they are paralyzed, began in Israel, currently operates in California, but manufactures in Israel.
No field for weaklings
"Our main challenge today for all the companies is insurance cover," Hankin says. "The FDA, which allows us to market our products, has become friendlier in recent years, but the insurance companies aren't paying for the products, and a small company without much financing has a very difficult time getting such payment. The experience of companies in designing their products from the beginning so that the insurance companies will have to pay for them under the existing code is strangling innovation. This field is not for weaklings."
"Globes": Are you also active in digital health?
Hankin: "Less so. It's still impossible today, using a smartphone or wearable devices, say, to non-invasively collect digital information that will really change a doctor's decision. Maybe the combination of implanted devices, maybe an injection of nano-components into the body, will make the information a little more significant, but it's hard to know. In any case, it's an exciting idea. The problem with this field today is a lack of communication between different medical records. We need integration people to connect them, and maybe they'll come from Israel.
Published by Globes [online], Israel business news - www.globes-online.com - on August 25, 2016
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