The Israeli government has set up a US$250 million biotechnology fund to rejuvenate the nation’s innovative drug development sector, but the local drugmaking sector is still in need of investment, says a recent report.

Israeli giant Teva Pharmaceutical Industries is the world’s largest generics maker and has also successfully developed and marketed its own patented medicines, but smaller, research-based ventures in the country which have developed innovative drugs have had to use multinational firms as commercial partners due to their lack of marketing experience, according to the study, from Business Monitor International (BMI). Biotechnology is a rapidly emerging segment of the pharmaceutical sector and is more expensive but therefore of higher value and, for Israel, actively boosting the sector’s development can provide a means of encouraging patented drug expenditures, albeit only in the long run, it says.

Israel’s total pharmaceutical market should increase in value from 6.14 billion shekels ($1.56 billion) last year to 6.52 billion shekels ($1.84 billion) by 2014, growing at an average annual rate of around 3.2% in US$ terms, according to BMI. It forecasts that medicines spending per capita will increase from US$211 to US$227 over the period, and that, by 2014, the nation will be spending 0.65% of GDP on pharmaceuticals, representing a marginal decline over 2009.

Israeli spending on generic drugs reached 1.38 billion shekels ($352 million) last year, accounting for just over a fifth of all pharmaceutical expenditure. This share is expected to grow steadily, while the share of the total market held by patented drugs is expected to fall from 54.6% to 44.8% over the forecast period. However, the decline will be slow, mainly as a result of prescribing patterns and brand loyalty, particularly for patients on existing chronic treatments, says the study.

- Teva has forecast that the global generics market will reach a value of at least $135 billion by 2015 and says that by that time it plans to have doubled its annual sales, to $31 billion, and to have increased its brand-name drug business, currently standing at 30% of sales.

However, it was reported yesterday that Teva shares have suffered their biggest decline in 21 months following the US Food and Drug Administration (FDA)’s announcement on July 23 that it had approved the first generic versions of Sanofi-Aventis’ anti-clotting agent Lovenox (enoxaparin sodium injection) from Novartis and Momenta. This is the first time the FDA has approved a generic version of a complex molecule without full clinical trials, and investors fear that Teva’s flagship multiple sclerosis treatment Copaxone (glatiramer acetate injection), which is also a complex molecule and currently accounts for about 20% of the company’s sales, could now face a similar threat, sooner rather than later.

Observers writing this morning in Israel’s Haaretz newspaper also point to the fact that Teva currently receives the biggest tax breaks in Israel, at around nearly 2 billion shekels annually, under a programme introduced by the government in 2005 to attract investment into the sector. However, the Treasury is now considering the programme’s future, and one possibility is that the tax breaks could be abolished from next year, although Teva has told Haaretz that it would not be affected by any amendments to the scheme and that it will continue with the same tax arrangements for 13 years.