'Digital Health' Can't Be the Cure for Coronavirus, Top Medical Entrepreneur Says

'We won’t diagnose COVID-19 with an iPhone. It won’t happen,' Dr. Eyal Orion says, explaining why knowledge-based medical startups matter more in the time of pandemic

Dr. Eyal Orion, Tel Aviv, May 18, 2020
Ofer Vaknin

Dr. Eyal Orion is one of Israel’s outstanding medical entrepreneurs. Since 2009 his group has established five medical device companies that have attracted $135 million in investments. Famous angels, including Zohar Gilon and brothers Yehuda and Zohar Zisapel, give Orion their full trust and large checks – even though the group has yet to register a single exit.

The global coronavirus pandemic is creating considerable interest in the field of health initiatives, mainly in so-called “digital health.” But speaking from his modest Ramat Hahayal office, Orion tells TheMarker that “the coronavirus pandemic has exposed digital health in all its nakedness.

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“After all, you can find countless articles about how artificial intelligence will predict diseases, where they spread, who is ill and so on, via huge amounts of data and computer power. And then Judgment Day arrived, and what are we doing? What they did 300 years ago: quarantine, face masks and social distancing,” says Orion.

“I think that digitizing medicine is very important, it’s an infrastructure. But ultimately, in order to cure diseases we need deep research and deep technology. The importance of digital medicine in the current crisis is marginal. What’s everyone looking for? A vaccine for the coronavirus, tests for the coronavirus, genuine technology.”

And maybe to diagnose the virus via a smartphone.

“We won’t be able to diagnose the coronavirus with an iPhone, that won’t happen. That’s why I think Israel has to build a real medical industry. After all, we were caught with our pants down, without enough ventilators, and the military had to find solutions. We even imported test kits from China. So we asked Elbit and the army to provide ventilators, but that’s what the medical companies should have done. If we had 10 medical companies here with 500 employees, we wouldn’t have had to ask the army. If the present global crisis were related to cybersecurity or software, we wouldn’t have had to look for solutions abroad – everyone would have come here.”

So what do we need?

“We need a much stronger and more mature medical industry, based on profound knowledge and strong intellectual property, things that are hard to duplicate. The argument that Israelis don’t know how to manufacture is wrong. The argument that we don’t know how to sell is also wrong. It’s simply that for years that concept was, design some small modem and sell it to Sisco at the first chance. But there are a few people with chutzpah, like Eyal Waldman [of Mellanox] and Gil Shwed [of Check Point], who said, ‘I’m not building one box − I’m going to sell to the whole world.’

“There’s no reason why that shouldn’t happen with medical devices. Medical products have very strong protections. They are protected by patents and FDA [the U.S. Food and Drug Administration] approval, and it’s hard to manufacture them, but getting there is a 15-year process, and for entrepreneurs that’s sometimes too long.

“Every few months some cybersecurity entrepreneur who’s interested in entering medical comes to me because he wants to have an impact on the world, and I tell him: Great, but there won’t be an exit within three years, or even five. I tell them the truth: At best it’s a journey of 10 years, and that deters them.”

Is it better with pharmaceuticals?

“Yes, because of the drug companies in Israel and their deep pockets. In medical there’s a shortage of money and skilled human capital, and the ecosystem in general is lacking. What representation does medical have on the media’s lists of promising startups? None. It’s all a sign of an undeveloped ecosystem, that there’s no mature industry. In 2007-2010 there were 15 funds in Israel for classical medical equipment and 10 incubators. Now there’s almost nobody who will invest: They’re all involved with digital health. But that’s a mistake, because look at the success stories. The world’s leading company in catheterization is Edwards Lifesciences, but much of what they do is based on the acquisition of the Israeli firm PVT, which developed technology for replacing a heart valve without surgery.

The coronavirus ward at Ichilov Hospital, Tel Aviv, April 21, 2020
Ohad Zwigenberg

“The Given Imaging [endoscopy] capsule was sold to Covidien. That company acquired superDimension, which developed devices for diagnosing pulmonary diseases, for $300 million. NeuroDerm, which developed a tiny pump to deliver a drug to the blood through the skin, was acquired by Mitsubishi for $1.1 billion. Mazor Robotics, which developed a system that helps the surgeon in spinal operations, was sold for $1.65 billion to Medronix. It took entrepreneur Ori Hadomi 15 years to achieve this with Mazor Robotics, but it’s all medical devices, not digital health. There you’ll find maybe three exits totaling $100 million.”

If there are success stories, where are the investors?

“The investors fled because Israel has investment alternatives in the software and cybersecurity industry, which enabled them to get money much faster. The field of medical technology is really complicated, it’s not a startup that a 25-year-old can found because his uncle is a doctor. You have to understand how the world works, and there’s a need for abilities and imagination.”

Imagination?

“I’ll give you an example. Strokes are a huge problem. Until 2008-2009 the only treatment was a drug that dissolves blood clots, which works in maybe 20 percent of the cases and with terrible side effects. If the patient suffers from internal bleeding, it spreads immediately throughout the body. But there were entrepreneurs who came and said that in another 10 years there won’t be such a thing: We’ll develop one-millimeter catheters, which will extend from the crotch to the brain and remove the clot.

“In 2010 we also started a company in that field, called Perflow Medical. They came and told us: You’re crazy, in Israel there isn’t a single doctor who knows how to catheterize in the brain, and that was true. But now there are 10 brain catheterization units in Israel, and that’s the horizontal standard in the industry with 30 percent growth annually.

Investor Zohar Gilon, August 3, 2012
Eyal Toueg

“The same thing happened earlier with heart catheterization. The medical world is a conservative one, with hierarchical and patriarchal systems. To a great extent, the department head will determine your professional future, and if he says something, you believe him. To come and say that in another 15 years they won’t open a chest cavity but will insert a stent with a tube from the vein, despite the opposition and the skepticism — that requires imagination.”

From medicine to business

Orion, 43, divorced with two children, grew up and lives in Ramat Efal. In the army he served in the Paratroopers commando unit, during the tough years of the Lebanese outposts. A doctor by training, he decided to become an entrepreneur.

“I have no doctors in the family, and I was supposed to be the first. I studied medicine at the Technion [Israel Institute of Technology] and the first years were fascinating, but in the fourth year you switch to the hospital and start being exposed to routine activity. And then I realized there was no field of medicine that excited me enough. You shouldn’t enter this field out of inertia, or because you’ve already studied for seven years, or because you don’t want to tell your mother, ‘I’m not going to be a doctor.’”

Instead he studied for a master’s degree in Business Administration, like his sister. There he met Dr. Idan Tamir, CEO of Rad Biomed, an incubator for medical devices. He started out there as an intern.

“In one of the courses Dr. Tamir gave a lecture, and at the end I approached him and told him, ‘I want to work for you, for no pay. I’ll do meeting summaries for you, or whatever you want.’ He agreed. In 2006 I finished my internship and to my surprise they recruited me to the incubator to work on Rad Biomed’s deal flow. That’s when you sit close to the entrepreneurs, and if you’re inquisitive enough – you learn.”

From there, Orion became an entrepreneur himself in five medical tech companies.

VGS (Vascular Graft Solutions) started out in 2009. “Currently the most common operation in cardiac and vascular medicine is a bypass operation, in which you take a vein, usually from the leg, and replace an artery,” explains Orion. “The problem is that the vein is not built for such pressure, and over time it becomes ill. At VGS we developed external support for the vein, which gives it the biomechanical qualities of an artery and prevents the pathological process. In other words, we turn a vein into an artery.”

Entrepreneur Zohar Zisapel, October 29, 2009
Ofer Vaknin

This product has been implanted into about 5,000 patients, has undergone five clinical trials and received a sales permit in Israel and Europe. A U.S. permit is expected in 2021. VGS has already raised $30 million.

The second company in the group was established in 2010: Perflow Medical, which improves the process of brain catheterization in the event of a stroke. The third company, established in 2011, is Vectorious, managed by Oren Goldstein. “Fewer people die today from heart attacks, but the heart remains scarred and this pump doesn’t function well,” says Orion. “This is a chronic disease that leads to liquid retention in the legs, the lungs and other body parts. The problem is that the doctor has no precise estimate, as exists for glucose, for example, for how much liquid is in the body.

“In order to manage such chronic patients, you have to enter the left atrium in the heart and measure liquids there. But it’s impossible to build something big: It’s one heart chamber the size of a ping pong ball. So we started out with a tremendous technological challenge, and we developed the smallest pressure sensor in the world, which is 1.5 mm with a 0.7 mm antenna. There are numerous chronic diseases that require precise indicators, and you can’t monitor patients who are using dangerous medicines via an Apple Watch. It’s dangerous and it doesn’t work.”

Vectorious’ product is a tiny wireless implant, which monitors cardiac function and broadcasts the data. The company also found a creative solution for charging: Every evening the patient wears a kind of chest belt that charges the device wirelessly via an electromagnetic field, and also synchronizes the past 24 hours’ of data.

“Suddenly the doctor has quality data from inside the heart and can make decisions, such as changing the pacing in the pacemaker. The technological and clinical challenges were huge, and we progressed one step at a time,” says Orion.

Vectorious has raised $35 million to date, and the implant is already installed in about 15 people from Germany, Italy and Israel. “We got stuck a little because of the coronavirus; we were supposed to have 25 people already.”

‘No innovation from big companies’

The fourth company in the group, Laminate, is led by entrepreneur Tammy Gilon, daughter of Zohar Gilon, a high-tech angel with almost 60 exits. The company developed a device that improves the point of entry of the infusion for dialysis patients.

“This connection of the dialysis machine to the body is called a fistula, and it’s very problematic and fails at an insane rate, 50 percent in the first year. It’s a problem that wasn’t solved for 40 years, and Laminate created a device that is placed on the fistula and optimizes the geometry of the connection and the flow pattern. The product has been 90 percent successful.”

Entrepreneur Yehuda Zisapel, December 5, 2015
Eren Dolev

The final company in the group is Body Vision, which is more of a software company: It develops and sells a system for simulating and navigating inside the lung for early diagnosis of lung cancer.

“Our goal in all the companies is to create a horizontal standard – for things to be done that way for several more years. I believe the role of medical technology startups is the same as the role of high-tech in every other industry: to create innovation, because innovation doesn’t come from the big companies. But in medical technology it has to be related to basic science from the universities and hospital treatment.”

All the companies in the group are relatively small, with about 30 employees each. As is necessary in companies with hardware, some of the employees served in Unit 81 (the Military Intelligence technology unit). Only Body Vision has more graduates of Unit 9900 (the MI visual intelligence unit).

Regarding recruiting manpower, Orion says: “Workers come to us, but I don’t see movement in the opposite direction, because there’s a profound personal and business and technological challenge here that you won’t find in most of high-tech – the interaction between technology and biology. VGS has 20 employees, but they’re all involved in intensive activity, people who don’t see their homes and children, and some even divorce in the end, like me, but they have reached thousands of patients all over the world, and the products they build can remain in the world forever.”

The second common denominator is the investors: The Zisapel brothers and Zohar Gilon invest in all the group’s companies.

“These are people who have reached the stage in life when not only money interests them,” says Orion. Zohar Zisapel recently said of Orion in an interview for TheMarker: “There are investments that I call romantic investments. Companies that help mankind.”

And now, because of the coronavirus, do you see more interest from investors?

“I don’t like to appropriate the coronavirus unnecessarily. Suddenly I’m receiving presentations from companies that I’ve known for five years, and four slides are about the coronavirus, and that’s in spite of the fact that nobody knows how this virus behaves and what will become of it half a year from now. But yes, I’ve received more phone calls from capital in recent months..

“It is an opportunity, because it’s the type of crisis that makes it clear to you what’s more important and what’s less important in life, and what I want to do with my limited time on earth... And because the crisis is health-related and the health care system was exposed in all its nakedness, suddenly people interested in such problems are popping up.”