Israel is in a second lockdown due to Covid-19 until at least mid-October, but that has not stopped its medical technology industry — indeed the pandemic has boosted demand for some of its products. My interviews with a venture capitalist, a public-company CEO, and two early-stage startups reveal two pervasive themes:
- Companies are developing products that facilitate diagnosis and monitoring of disease without visiting a doctor’s office — increasingly in demand services during the pandemic.
- Startups are collecting and analyzing data on real-world patient outcomes to change the way new products are developed and medicine is practiced. This is applying a basic principle used by the Israeli military (and other national armies) — the after-action review — to the practice of medicine.
Olive Tree Ventures Invests In Fast-Growing Digital Health Companies
Olive Tree Ventures is an Israel-based venture capital fund investing in digital health startups. Olive Tree manages $155 million in assets and has provided capital to nine startups. It envisions significant opportunities in digital health — a market that has grown at 150% since 2017 and is anticipated to reach $540 billion in revenue by 2025. Underlying this growth is the industry’s technology which improves diagnosis rates for serious illnesses and develops new treatments for terminal diseases, according to Olive Tree.
Olive Tree’s founder has an impressive background. As Amir Lahat, Olive Tree Venture’s Managing Partner said in a September 1 interview, “I was in the army — not in the 8200. I was beyond the lines — at the age of 20 commanding over 100 people. I studied engineering at Tel Aviv University. 3Com acquired Telrad, [a company where I was a systems engineer.] I stayed there for four years then cofounded Atrica, that was backed by Accel, and Benchmark. Nokia acquired it [in 2008 for less than $100 million, according to EETimes]. I joined Nokia’s Business Venture Group. I returned to Israel with three kids and started Olive Tree in 2015 with three partners focusing on digital health.”
Olive Tree has invested in companies that are benefiting from the need to diagnose and monitor health outside of medical offices — a trend that has been accelerated by the social distancing in response to the pandemic. “In the last several years, there has been a rise in monitoring and diagnostic tests conducted outside medical offices. Our companies include TytoCare (about which I wrote in May) — which enables patients to conduct medical tests at home and send the results to physicians; ContinUse Biometrics — non-touch monitoring of vital signs for chronically ill and elderly patients; and Scopio — digital microscopy,” he said.
San Francisco-based Lemonaid Health, an Olive Tree portfolio company, is booming. Its service enables patients to chat online with a doctor to “get birth control or certain prescription drugs to treat simple conditions, like urinary tract infections or erectile dysfunction,” according to the company. Lahat told me. “Lemonaid is growing extremely fast, is profitable, and operating in 5o states through partnerships with doctors and online prescription providers.”
Itamar Medical Gives Faster, Less Costly Sleep Apnea Diagnosis
Itamar Medical — a publicly-traded medical technology company based in Caesarea, Israel with U.S. headquarters in Atlanta, Georgia — helps doctors diagnose and manage sleep apnea. Its key product, WatchPAT — a disposable sleep apnea device — is marketed in the U.S., Japan and Europe.
Itamar Medical’s growth is being propelled by patients seeking diagnosis and treatment of sleep apnea from home. Revenues in the second quarter of 2020 rose 21% to $8.9 million while U.S sales of WatchPAT jumped 31% to $6.6 million in the quarter, according to the company.
CEO Gilad Glick’s background as a U.S. executive contributed to his ability to boost growth at Itamar Medical. As Glick told me in a September 1 interview, “I worked for a small company [Biosense Webster] that was sold 18 months later for $400 million to Johnson & Johnson JNJ . I stayed there for 19 years — nine in Europe and 10 in California. In my last role there, I coordinated sales and marketing for a business whose sales increased from $1 million in 1997 to $1.5 billion when I left. It made an arrhythmia [irregular heartbeat referred to as Atrial Fibrillation (AFib)] management system and was located in Irvine, Calif. J&J forgot about us. AFib became more important and our sales grew to $500 million after 10 years. We got attention from J&J and reached $3 billion in sales in a $6 billion industry.”
Glick returned to Israel. “After three kids and 20 years in the U.S. we decided to reconnect with our Israeli roots. I wanted to take AFib to the next level. Our competition included J&J, Medtronic MDT , Boston Scientific BSX and Abbot Laboratories ABT . There is a procedure called ablation that burns part of the heart but does not prevent the cause of AFib. Bad sleep is an independent factor for AFib. Sleep apnea is a major cause of bad sleep which strains the heart and increases the chances of AFib.”
He joined Itamar Medical because he saw untapped opportunity. “When I joined [as CEO in July 2013, Itamar Medical] was a sleepy sleep company with debt and no growth. I wanted to fix it. The idea was to integrate sleep apnea with AFib. Sleep apnea affects 15% of the adult population — about 60 million people. When sleep apnea patients fall asleep, their soft tissue collapses which blocks their airways 10 to 15 times per hour. They wake up exhausted. It damages the heart tissue and is a cause of AFib.”
Itamar Medical makes a device that diagnoses sleep apnea. “We have a medical device — called a Peripheral Arterial Tonometry (PAT) test — that can detect sleep apnea in a way that is cheaper and easier for the patient. It was difficult to convince the industry to adopt PAT because sleep doctors were not compensated for it. The nocturnal polysomnography test — in which a patient spends the night at a sleep clinic — pays a sleep doctor $2,000 while the PAT costs $200.”
Since 2013, Glick has boosted Itamar Medical’s value. “Since 2013, the company’s market capitalization has increased from $50 million to [$314 million, as of September 18]. I joined because I knew about AFib, I thought I could create Israeli jobs, and we had no competition. The key to reviving Itamar was trying to convince cardiologists — of which there are 35,000 — [far more than the] 5,000 sleep doctors. We were able to show cardiologists that PAT could help make an AFib risk factor go away. Before Covid-19, 90% of sleep apnea tests happened in the sleep clinic, only 10% were done via PAT. Since Covid-19, sleep labs have closed down which has been a big boon for us.”
In the last two and a half years, Itamar has been selling WatchPAT. “An early device was sold to doctors. We found that the logistics of a patient getting the $200 device back to their doctor [were onerous]. We created a fully-disposable version that uses a smartphone app to collect and transmit the test results. Since launching it, our sales have increased from between $3.5 million and $4 million a quarter to $10 million a quarter,” Glick said.
Theator Helps Surgeons Make Better Decisions
Theator operates Minute, a platform that shows highlight reels of successful operations — conducted by a similarly experienced surgeon with a patient in the same condition — before a surgeon is about to perform the operation.
As Theator’s CEO and Co-founder Tamir Wolf explained in a September 15 interview, “I am from Haifa and earned an MD/PhD from the Technion. I started serving as a physician in the Israeli equivalent of Seal Team 6. During the second Lebanon war, I was supporting a unit that was targeted with missiles. There were 13 wounded and I was the only MD. I was operating on two of my friends under fire in retreat. Luckily they are alive. I had never gone through it before. What was I thinking? What was I doing? I could have used guidance from more experienced people.”
After a few more years in the military, he needed a break. He went to work at a medical device company in Cambridge, Mass. and then to Harvard Business School. “To the disappointment of my mother, I decided I could have a bigger impact at a larger scale as an entrepreneur, rather than a clinician. The problem I wanted to solve was epitomized by two cases of appendicitis I treated at different hospitals seven miles apart in New York City. Due to a snowball effect of bad decision-making from the time the first one, my boss, entered the hospital, he nearly died. The second one, my wife, had a tummy ache. 12 hours from the time she entered the hospital, she was back home and cured. Such crazy variability in 2016 didn’t make sense.”
Wolf cofounded Menlo Park, Calif.-based Theator, with the aim of improving patient outcomes by helping surgeons make better decisions. “Since the 1600s, surgery has worked by the apprenticeship model in which individuals learn from experienced surgeons about how to make good decisions. My goal was to provide analyzed surgical footage — a highlight reel that condenses, say, five hours of surgical video — searchable by the surgeon’s level of experience, medical procedure, and the patient’s disease and condition. The surgeon would be able to watch this highlight reel to prepare for their next surgery. We’ve developed an algorithm that annotates everything to create the highlight reel for an hour surgery 15 minutes after it’s over. I was able to partner with my cofounder Dotan Asselmann — who was a computer vision wizard from the 8100 [an elite unit of the Israeli Defense Force].”
Theator — which raised $3 million in seed funding in April 2019 — operates a business-to-business model. The company targets a serviceable addressable market of $6.2 billion for minimizing complications from general surgery, Theator partners with providers of so-called towers — that record videos of surgeries. The company charges general surgeons, gynecologists, urologists and others a monthly or per tower fee. Theator is now running pilots with early-adopters such as leading professional societies, McGill University and others.
StuffThatWorks Brings The Voice of the Patient to Drug Development
Yael Elish — who was in charge of product at Waze, the crowdsourcing traffic app acquired by Google GOOGL for around $1.3 billion in 2013 — is the cofounder and CEO of StuffThatWorks (STW), a crowdsourcing platform launched in 2018 for patients to share their experiences with a variety of diseases and treatments.
At Waze, Elish solved a big marketing problem — reaching a critical mass of users willing to provide accurate, timely road condition reports. As she explained in a September 3 interview, “How do you ask people to join and contribute [to a crowdsourcing site when it is too small to offer] value? It needs to be very professional. Users have to be proud of contributing to achieving the vision and jointly building value. It’s about setting expectations right: that it will take one or two years to provide more value.”
STW was started as a solution to a problem that Elish faced. “While I was working at Google after it acquired Waze, my daughter had a chronic condition. It didn’t have to be life threatening. It caused suffering in the family as it got worse. I was searching frantically online every night for a clear idea. I thought ‘there must be something out there — maybe a blog post from a teenager.’ Finally, I found a treatment in Israel. My daughter started taking it and within three weeks [her symptoms] went away.”
STW aims to focus the innovation agenda of pharmaceutical and medical technology companies more squarely on improving patient outcomes. “There are 10,000 chronic conditions affecting 6.5 billion people worldwide and the situation is getting worse. [With a few exceptions] there is no information about what is happening to these patients. Whoever has the money — e.g., pharmaceutical companies — focuses on a subset of patients without information on what is working. There is no comparison between methods. We are crowdsourcing to collect real-world evidence that will shift the focus to what works for patients,” Elish said.
STW has been operating in stealth mode for two years. In July 2020, it raised $9 million, according to TechCrunch. It has data on over 100 different conditions, from 220,000 contributors — with 12 million data points, Elish said.
Elish eventually left Google and cofounded STW with two others. According to TechCrunch, these included, CTO Ron Held — a “trained mathematician and former head of an IDF intelligence team” — and Chief Data Scientist, Yossi Synett, who is “an expert in machine learning, AI, and hands-on analysis.”
STW helps patients and medical researchers. It provides a forum for patients to share their fears and exchange tips on effective and ineffective treatments. It also brings the voice of the patient into the process of developing disease treatments.
As Dr. Amir Tirosh, Director, Division of Endocrinology, Diabetes and Metabolism at Sheba – Tel Ha Shomer Hospital and Assistant Professor at Harvard Medical School told me September 15, “[As chair of the STW sub-committee for type 1 diabetes] I am thrilled to help Yael to use new social networks to break a taboo in the industry: allowing patients to tell us what they think is important. Pharmaceutical companies test medicines compared to a placebo because regulatory agencies require it. But that leaves many questions unanswered about efficacy, side effects, and additional approaches.”
The STW databases help scientists to see specific disease symptoms in the context of environmental factors that cause the disease and in relationship with other conditions. Tirosh said, “STWs’ databases allow medical science to map tens of thousands of patients around the world with weather maps, air pollution, and other physical and mental conditions. For example, polycystic ovarian syndrome is a condition with physical symptoms — such as increased hair growth and risk of diabetes — as well as mental conditions — such as depression and anxiety,” Tirosh explained.
Israel’s digital health industry is aiming at relieving patient pain. The current pandemic is making the need for such solutions increasingly urgent. Perhaps some of the companies discussed here could make attractive acquisition opportunities for growth-hungry incumbents.