The Biotech Buyout

The lead headline of TheMarker one day last week could have been: "Biggest buyout in Israeli history! Germany's Merck buying Israeli biotechnology company for $6 billion".

But it wasn't. For news of Merck's purchase of Serono you'd have to thumb through the foreign news section.

If you read on, you'd learn that one of the main profit drivers at Ares Serono of Switzerland is Rebif, a treatment for relapsing-remitting multiple sclerosis.

The reason that Esnesto Bertarelli, who owns Serono, decided to sell his economy is that in recent years Serono hasn't had many new drug launches.

But the true story behind Serono is that its founder, Fabio Bertarelli, managed through a series of financial and legal machinations, to buy the enormously valuable development of Rebif for a mess of pottage. It bought the rights from a number  of Israeli sources: the Weizmann Institute, Israeli investors, the Israeli company Interpharm, and the Chief Scientist of the Ministry of Industry and Trade, who helped in establishing Interpharm.

Much of Serono's success, and the reason for its tremendous valuation, derives from that Israeli drug. But neither the Weizmann Institute or the Israeli taxpayer is likely to see much, not much at all.

Merck's move was just before Rosh Hashana, and serves to remind us of the tremendous potential in Israeli minds, initiative and management, too. It also reminds us of the structural and personal flaws in the institutions, legal and governmental, which prevent us from realizing that potential.