Pharma giant Bayer scouts Israeli startup scene in search of competitive edge

Hugo Hagen, Bayer’s local chief, says the company has invested heavily in Israeli firms and is looking for more: The Israeli ‘culture of innovation is amazing’

Shoshanna Solomon is The Times of Israel's Startups and Business reporter

Hugo Hagen, the managing director & country division head of Bayer, Israel. (Courtesy: Danit Nitzan/Bayer)
Hugo Hagen, the managing director & country division head of Bayer, Israel. (Courtesy: Danit Nitzan/Bayer)

If the coronavirus pandemic has proved something to global pharmaceutical giants, it is that they need to tap into the power of younger, nimbler startups and the latest technologies to be able to stay at the top of their game and ahead of competition.

Of the three coronavirus vaccines being widely distributed in the West, one was the result of a partnership between a blue chip pharma firm and a biotech startup — Pfizer-BioNTech; one was the result of a collaboration between another massive firm and a university — AstraZeneca-Oxford; and one was developed by a pharmaceutical company that has barely been around for a decade — Moderna.

This shift of big pharma tapping into the startup ecosystem has been happening for over a decade, said Hugo Hagen, the managing director and country division head of Bayer Israel, in an interview with The Times of Israel last month. And it is set to accelerate further, he predicted.

“It is quite some time that the pharma industry realized that we cannot do everything on our own,” Hagen said. “From being traditionally focused on developing drugs in-house, now there is a significant shift, and in different pharma companies much of the pipeline comes from the outside.”

Headquarters of Bayer AG in Leverkusen, Germany (Courtesy)

“Bayer is still focused on in-house drug development and R&D but we are also expanding our opportunity-seeking outside of our own traditional scope and had been doing so for quite some time,” he said.

Hagen, 47, has been in Israel since 2019, scouting for Israeli technologies in the fields of pharma, agriculture, and now digital health technologies as well for the 150-year-old life sciences German-based firm Bayer AG, one of the largest in the world by sales.

His job, he said, is to “ping” managers at the HQ about what is going on in the local ecosystem, alerting them about latest developments. Competition to find the next big thing in the Israeli ecosystem is high.

“There are so many companies scouting for those good ideas,” he said. “If there is an Israeli company with good phase II (clinical trial) data, I’ll promise you it is on the radar already of many pharma companies.”

In January, Bayer’s investment arm, Leaps, invested in Israel-founded biotech firm Ukko, which raised a total of $40 million from investors in a series B funding round to use artificial intelligence and protein engineering to develop healthier food and therapies for food allergies.

A net greenhouse in Los Pinos, Mexico, the largest greenhouse tomato project in the country, developed with Israel’s Netafim drip irrigation and greenhouse technology. (courtesy Netafim)

The German firm, which has been active in Israel since 2008, has been tapping into local opportunities in both the pharmaceutical field and the ag-tech sector. The company invested in plant genomics firm Evogene in 2010; in Compugen Ltd., a cancer immunotherapy firm in 2013; and in drip irrigation developer Netafim in 2016.

In 2016, Bayer set up an agricultural innovation fund together with the Trendlines Group, an investment company, to treat bacterial diseases in crops, and has partnered with Israeli biotechnology incubator FutuRx to foster startups focused on innovative therapeutic technologies.

The firm also collaborates with Prospera Technologies to improve agriculture output using the AI and advanced data collecting methods developed by the Israeli startup.

In 2019, a delegation of 15 senior officials of Bayer visited Israel to seek out partnerships and investment opportunities in local startups in the field of biotechnology and digital health. Similar visits had been held until then only in countries considered among the leaders in the field of biotech, pharma and digital innovation, including Germany, China and the United States.

“I am very happy with what Israel has to offer,” Hagen said. “I would really like to see more active investments in more areas in Israel,” he said, adding that he hopes Bayer will see “further investments in Israel in 2021, on top of the Ukko investment that has already materialized.”

Collaborations with Israeli universities are also on the agenda, along with an increased focus on digital health, he said.

In June, Bayer signed a collaboration agreement to test out new drugs on human heart tissue 3D-printed by researchers at Tel Aviv University.

The 3D printed heart by researchers at Tel Aviv University; a view from above; May 2, 2019 (Shoshanna Solomon/Times of Israel)

Regarding digital health, he said, new technologies in the field will enable the drugmaker to widen its scope, from treating diseases with drugs to helping prevent them with AI, monitoring and predictive technologies, he said.

“What Bayer wants to be part of now is digital health which encompasses
everything from advanced computing to identify new drug combinations to mobile app-based patient assistance programs. Digital technologies have the potential to help transform the way novel medicines are discovered, developed and delivered to patients.”

The company has not made any acquisitions of Israeli firms, and has faced a period of unprecedented turbulence following its 2016 purchase of US agritech firm Monsanto for $66 billion. Along with the company, Bayer acquired what turned out to be over $10 billion in lawsuit settlements stemming from the use of Monsanto’s weed-killer Roundup, which allegedly causes cancer. Its market capitalization dropped from a high of $116.8 billion in 2017 to just $46.1 billion in October. It has since recovered to $65.9 billion.

A medical worker administers a COVID-19 vaccine at a Clalit vaccination center in Jerusalem, on January 21, 2021. (Yonatan Sindel/Flash90)

Bayer, which was built on the back of its invention, aspirin, has never been a major vaccine player, and initially stayed out of the potentially lucrative race for a COVID-19 prophylactic, which some pharma firms feared would turn into an expensive debacle like the mostly unused swine flu vaccine in 2009.

But in January it decided to dive in and signed a collaboration and services agreement with CureVac NV, a German biopharmaceutical company developing a COVID-19 vaccine candidate based on messenger ribonucleic acid (mRNA) technology, similar to shots created by Moderna and Pfizer-BioNTech.

The logo of the biotech company Curevac with slogan “the RNA people” at company headquarters in Tuebingen, Germany, January 7, 2021. (Sebastian Gollnow/dpa via AP)

Despite its late entry to the field, there is still “a high unmet medical need” in countries where only a fraction of the population has been vaccinated, Hagen said. He said the vaccine was slated to be ready for marketing later this year.

As part of the collaboration, Bayer will contribute its expertise and infrastructure in areas such as clinical operations, regulatory affairs pharmacovigilance, medical information and supply chain performance as well as support in selected countries, the company said in a statement.

Hagen himself received both doses of the Pfizer vaccine in Israel, where it has been widely distributed including to noncitizen residents.

The Bayer chief said he is happy to give Pfizer and BioNTech credit for the “amazing” work they did developing the vaccine.

“What Pfizer has managed to achieve for the last six months in reputation is amazing. They have accomplished what any pharmaceutical company would dream of,” he said. “Everybody knows the name Pfizer, everyone associates it with saving the world, giving the vaccines, bringing us back to normal.”

Hugo Hagen, the managing director & country division head of Bayer Israel. (Courtesy: Danit Nitzan/Bayer)

The Norwegian-born Hagen spoke with this reporter in a coronavirus-dictated outdoor meeting on a sunny winter day at an ecological park in Hod Hasharon, near the firm’ local headquarters where some 100 people are employed.

Hagen, who started his job in June 2019, talked about how challenging the coronavirus has made his family’s stay in Israel. A whole list of Norwegian family members were supposed to visit them in 2020, he said, but all those plans were put on hold because of the virus.

But he loves both the job and the country, he said, chuckling about how in a meeting with Israeli entrepreneurs the Bayer delegation last year was surprised by the informal local dress code, including one person wearing open-toed sandals.

“I love the attitude,” the Israeli “sense of urgency,” Hagen said. The fact that people are “blunt, honest, upfront. Some people may find it very direct, but I appreciate that. I hate when people are molding things into words, and I don’t understand what they are actually saying. Israelis are very direct.

“The culture of innovation is amazing. You see a challenge or you see a problem and you decide, I am going to solve it, there is nothing in this world that is going to keep me from solving that problem — which is an amazing spirit to have.”

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