8: ISRAEL LIFE SCIENCE NEWS
8.1 Cannabics Pharmaceuticals Announces Cannabigerol Shows Anti-tumor Properties
Cannabics Pharmaceuticals announced that in a pre-clinical study held at the company’s High Throughput Screening (HTS) lab facilities in Israel, preliminary findings show that the cannabinoid Cannabigerol (CBG) was shown to have a greater anti-tumor effect on human stomach and bone cancer cell lines compared to CBGA, the acidic form of the compound. CBG is a non-psychoactive cannabinoid found in minute quantities in the raw cannabis plant. Also known as the “mother” cannabinoid, other cannabinoids such as THC, CBD, CBN and CBC are synthesized from CBG. It is anecdotally known to show promise in having anti-inflammatory qualities and may act as an antibacterial agent. In the current experiment, the HTS platform was utilized to screen the necrotic effects of both CBG & CBGA on various types of cancer cell lines. Interestingly, CBG was found to induce necrotic effects while CBGA had no such effect.
These findings further support previous research performed by the company, which has consistently shown differential anti-tumor effects when using a variety of cannabinoids on human cancer cells, derived from both fresh biopsies and cell lines. These preliminary findings could allow Cannabics Pharmaceuticals to offer in the future, pending further research, a more extensive and thorough personalized report for patients advising them on cannabinoid medicine therapy protocols in order to maximize positive outcomes.
Pharmaceuticals to offer in the future, pending further research, a more extensive and thorough personalized report for patients advising them on cannabinoid medicine therapy protocols in order to maximize positive outcomes.
Cannabics Pharmaceuticals is developing a platform which leverages novel drug-screening tools and artificial intelligence to create cannabinoid-based therapies for cancer that are more precise to a patient’s profile. By developing tools to assess effectiveness on a personalized basis, Cannabics is helping to move cannabinoids into the future of cancer therapy. The company’s R&D is based in Israel, where it is licensed by the Ministry of Health to conduct scientific and clinical research on cannabinoid formulations and cancer. (Cannabics 09.01)
8.2 Israel’s Sphera Wines Joins the Global Portfolio of Dreyfus Ashby & Co.
Dreyfus Ashby & Co., a leading wine and spirits importer with a distinguished portfolio of family estate brands from around the world, announced the addition of Sphera Winery to its fine wine portfolio. This addition allows Dreyfus Ashby to complement its premium wine offerings from around the world with these white wines from the Judean Hills of Israel.
Dreyfus, Ashby & Co., a national importer representing a global portfolio of fine wines and spirits, was founded in London more than 70 years ago by Swiss-born Michel Dreyfus. In 1945, he moved the company to New York City, where it is headquartered today. From the beginning Dreyfus, Ashby & Co. devoted itself to dealing in superior wines from renowned family-owned vineyards and estates. (Sphera Winery 07.01)
8.3 caresyntax & ARC at Sheba Medical Center Launch Collaboration to Predict Surgical Outcomes
Berlin’s caresyntax, a pioneering developer in surgical automation, analytics and AI, announced the launch of a research and development collaboration with ARC at Sheba Medical Center, the leading hospital facility of its kind in Israel and the Mideast. Sheba Medical Center, which is focused on game-changing medical innovation, was ranked by Newsweek as one of the top ten best hospitals in the world in 2019. The collaboration will enable caresyntax to measure surgical data across more than 300 variables in oncological procedures using artificial intelligence and machine learning to develop algorithms that will predict surgical outcomes and enable a higher quality of care for both patients and surgeons.
The ARC (Accelerate, Redesign, Collaborate) complex at Sheba Medical Center collaborates with international medical centers and healthcare companies around the globe to advance medical innovation, biotechnology and patient care. Currently, Sheba Medical Center serves more than 1 million patients per year and more than 25% of all Israeli medical clinical research is conducted in its facilities. Sheba Medical Center has a proven track record of treating oncology patients, and caresyntax will leverage ARC’s expertise and scale of data resources to enhance the strength of caresyntax’s automation and analytics software.
caresyntax and ARC at Sheba Medical Center expect to publish preliminary results for the first phase of the research project in the second quarter of 2020. Following those results, caresyntax expects to begin the second phase of the project, which includes embedding the tested algorithms into the intraoperative decision support module within the caresyntax product portfolio.
Born together with the State of Israel in 1948, Sheba Medical Center, Tel HaShomer is the largest and most comprehensive medical center in the Middle East. Sheba is the only medical center in Israel that combines an acute care hospital and a rehabilitation hospital on one campus, and it is at the forefront of medical treatments, patient care, research and education. As a university teaching hospital affiliated with the Sackler School of Medicine at Tel-Aviv University, it welcomes people from all over the world indiscriminately. (caresyntax 07.01)
8.4 ADAMA & TAU Establish Center for the Development of Innovative Crop Protection Solutions
ADAMA and Tel Aviv University launched a unique research and teaching program on active substance delivery and formulation, an innovation and growth driver in the worlds of agriculture and crop protection. The innovative study program will be taught at The ADAMA Center for Novel Crop Protection Delivery Systems at Tel Aviv University. The collaboration between ADAMA and TAU will combine the worlds of industry and academia, training advanced degree research students of chemistry, life sciences and engineering in the delivery and formulation of active crop protection substances, a field in desperate need of more experts.
ADAMA will also be investing in a world-class research laboratory that will be established in the School of Chemistry, where the program’s research and experiments will be carried out. ADAMA will award scholarships to 25 students from a range of disciplines such as chemistry, materials engineering, plant sciences and others, who will earn their advanced degrees with specialization in delivery and formulation. Students will have access to ADAMA’s state-of-the-art laboratories to conduct experiments and will receive practical training from the Company’s research people.
This initiative is also tied to ADAMA’s vision for the next generation of crop protection formulations. These products are anticipated to deliver better efficacy to control crop disease, combat resistances and enhance farm yields and food supply while requiring less usage of crop protection active ingredients thus reducing their footprint on the environment and in the food chain.
Airport City’s ADAMA Ltd. is one of the world’s leading crop protection companies. With one of the most comprehensive and diversified portfolios of differentiated, quality products, ADAMA’s more than 7,000-strong team reaches farmers in over 100 countries, providing them with solutions to control weeds, insects and disease, and improve their yields. A year ago, ADAMA inaugurated an innovative research and development campus in Neot Hovav, accommodating over 100 researchers. Dozens of collaborations are underway at the Campus with researchers and academics specializing in chemistry, agronomy, agriculture and other disciplines. (Adama 09.01)
8.5 Colospan Announces FDA Approval of IDE for Intraluminal Bypass Device
Colospan announced that the United States FDA has approved the company’s investigational device exemption (IDE) application. With this IDE approval in hand, the company will launch its pivotal study for CG-100, a temporary Intraluminal Bypass Device, designed to reduce diverting stoma rates in patients undergoing gastrointestinal resection procedures. CG-100, Colospan’s lead product, was developed as an alternative approach to diverting stoma. In comparison to a diverting stoma which is usually deployed for 4-6 months and requires a second surgery for removal, Colospan’s CG-100 is deployed for 10 days and can be easily removed under x-ray without the need for a secondary surgical intervention.
Kfar Saba’s Colospan is focusing on the development of novel and proprietary solutions for colorectal surgery. The company is dedicated to addressing the clinical and economic consequences of anastomotic leaks, the first and foremost challenge in colorectal surgery. Colospan’s lead product, CG-100, is designed to offer an alternative to the ostomy pouch, to minimize health risks and enable patients to maintain dignity post-surgery. The company holds a CE mark for CG-100 intraluminal bypass device as well as ISO 13485:2016 certification. The CG-100 is not approved for sale in the United States and is limited to investigational use. (Colospan 08.01)
8.6 US FDA Clears Aidoc’s Complete AI Stroke Package
Aidoc announced that the US FDA has cleared its AI solution for flagging Large-Vessel Occlusion (LVO) in head CTA scans, marking Aidoc’s fourth FDA-cleared AI package. Combined with Aidoc’s previously cleared AI module for flagging and prioritizing intracranial hemorrhage, together they provide a comprehensive AI package for the identification and triage of both ischemic and hemorrhagic stroke in CTs, speeding time to treatment when every minute counts.
Aidoc’s always-on solution continuously scans images for both ischemic and hemorrhagic stroke, automatically moving suspected cases to the top of radiologists’ worklists. Aidoc’s integrated solution provides a single context for radiologists to diagnose both LVO and hemorrhage, so they can quickly decide on the most appropriate course of action. Often, patients are diagnosed with stroke in a smaller facility before being moved to a specialist stroke center for treatment. Aidoc’s combined stroke solution ensures that the diagnosing facility and the stroke center can work together in a coordinated manner to expedite patient care.
A leader in AI healthcare, Tel Aviv’s Aidoc is one of Time Magazine’s 50 Genius Companies and its founders were recognized in Forbes’ “30 under 30” list. The company’s solutions analyze medical imaging to provide the most comprehensive solution AI offering in the field. Aidoc is used by radiologists worldwide, aiding them in maximizing their clinical performance and expediting patient care. In 2019, Aidoc’s pulmonary embolism solution won the “Best New Radiology Software” Minnie award. Aidoc is currently deployed across five continents and has analyzed more than 3.2 million scans in clinical workflows. (Aidoc 13.01)
8.7 BioProtect Announces Initial Closing of Equity Financing
Tzur Yigal’s BioProtect, a private company developing unique bio-absorbable polymer spacer balloons, announced the initial closing of $13 million of its Series D equity financing from a leading global syndicate of venture investors. BioProtect’s pipeline of spacing products improve outcomes in radiotherapy and interventional oncology procedures as well as in aesthetics and general surgery.
Major investors leading the round are the family office of Vincent Tchenguiz, chairman of Consensus Business Group, a prominent private equity investor in Israel and the UK with an expanding focus on life sciences who committed $7 million. In addition, leading medtech venture investors Accelmed Ventures II, and KB Investments, a major Korea-based financial institution, have together contributed an additional $6 million. Proceeds of the round will finance the ongoing multicenter FDA clinical trial of BioProtect’s lead product, the ProSpace balloon spacer, which protects prostate cancer patients undergoing radiation therapy, as well as the expansion of the technology platform.
The ProSpace balloon spacer helps reduction of radiation therapy risks by pushing the prostate away from adjacent organ at risk, the rectum. Once injected with saline the spacer offers physicians a consistent gap of over 1.5cm, is visible under CT. The spacer remains stable during radiation therapy and is gradually absorbed after radiation therapy is completed. BioProtect’s future pipeline represents a $4 billion opportunity, with additional applications for cervical cancer radiation therapy, pancreas radiation therapy and during breast radiation therapies. (BioProtect 14.01)
8.8 BioLineRx Designated Orphan Drug for Treatment of Pancreatic Cancer in Europe
BioLineRx announced that the European Commission (EC) has granted Orphan Drug Designation to its lead oncology candidate, Motixafortide (BL-8040), for the treatment of pancreatic cancer, based on a positive opinion from the Committee for Orphan Medicinal Products (COMP) of the European Medicines Agency (EMA). Last year, Motixafortide received Orphan Drug Designation for the treatment of Pancreatic Cancer from the US FDA.
The EMA grants orphan medicinal product designation to investigational drugs intended to treat, prevent or diagnose a life-threatening or chronically debilitating disease affecting fewer than five in 10,000 people in the EU and for which no satisfactory treatment is available or, if such treatment exists, the medicine must be of significant benefit to those affected by the condition. Orphan medicinal product designation provides regulatory and financial incentives for companies to develop and market therapies, including ten years of market exclusivity, protocol assistance, fee reductions and EU-funded research.
Motixafortide is targeting CXCR4, a chemokine receptor and a well validated therapeutic target that is over-expressed in many human cancers including PDAC. CXCR4 plays a key role in tumor growth, invasion, angiogenesis, metastasis and therapeutic resistance, and CXCR4 overexpression has been shown to be correlated with poor prognosis.
Modiin’s BioLineRx is a clinical-stage biopharmaceutical company focused on oncology. The Company’s business model is to in-license novel compounds, develop them through clinical stages, and then partner with pharmaceutical companies for further clinical development and/or commercialization. (BioLineRx 14.01)
8.9 Maccabi Teams with EarlySign on Israel’s First AI-powered Flu Vaccination Campaign
Medial EarlySign announced its flu complications algorithm has been selected by Maccabi Healthcare Services as part of the Israeli healthcare organization’s integrated strategy to enhance its flu vaccination campaign. The EarlySign investigational algorithm flags individuals at high risk for developing flu-related complications and is being used as part of a clinical study undertaken by Maccabi and EarlySign. EarlySign’s machine learning-based tool applies advanced algorithms to ordinary patient data, collected over the course of routine care. The flu complications algorithm uses this EHR data to identify and stratify unvaccinated individuals at high risk of developing flu-related complications, often requiring hospitalization.
Maccabi Healthcare Services is Israel’s second largest HMO, covering approximately 2.3 million patients, operating 5 regional centers, including hundreds of branches and clinics throughout the country. Maccabi’s clinical study using EarlySign’s flu complications algorithm supports the Israeli HMO’s commitment to investigating and implementing machine learning-based solutions to improve the health of populations. The program follows Maccabi’s initial collaboration with EarlySign in 2016, to identify individuals at high risk of colorectal cancer who are non-compliant with screening guidelines.
Hod HaSharon’s Medial EarlySign helps healthcare systems with early detection and prevention of high-burden diseases. Their suite of outcome-focused software solutions (AlgoMarkers) find subtle, early signs of high-risk patient trajectories in existing lab results and ordinary EHR data already collected in the course of routine care. EarlySign’s AlgoMarkers are currently helping clients identify patients at high risk for conditions such as lower GI disorders, pre-diabetic progression to diabetes, and downstream diabetic complications such as chronic kidney disease (CKD). (Medial EarlySign 13.01)
8.10 3D Systems & CollPlant Join to Accelerate Breakthroughs in Regenerative Medicine
Rock Hill, South Carolina’s 3D Systems and CollPlant Biotechnologies signed a joint development agreement intended to play a pivotal role in advancing and accelerating breakthroughs in the biomedical industry. The collaboration brings together two industry pioneers–3D Systems, renowned for its 3D printing technologies and healthcare expertise; and CollPlant, the developer of proprietary recombinant human collagen (rhCollagen) BioInk technology currently used for 3D bioprinting of tissues and organs. The two companies plan to jointly develop tissue and scaffold bioprinting processes for third party collaborators.
3D Systems and CollPlant recognized an unmet market need for a comprehensive solution to produce tissues and scaffolds for regenerative medicine applications. The companies intend to create integrated 3D bioprinting solutions comprised of state-of-the-art 3D bioprinters and BioInks to produce tissues and scaffolds. In accordance with the collaboration agreement, both companies may use a combination of 3D Systems’ printers, CollPlant’s BioInks, and new formulations of rhCollagen-based BioInks jointly developed by the companies, for their own products, as well as for deployments with third parties.
Rehovot’s CollPlant is a regenerative medicine company focused on 3D bioprinting of tissues and organs, and medical aesthetics. Their products are based on their rhCollagen (recombinant human collagen) that is produced with CollPlant’s proprietary plant based genetic engineering technology. They address indications for the diverse fields of organ and tissue repair, and are ushering in a new era in regenerative medicine. Their flagship rhCollagen BioInk product line is ideal for 3D bioprinting of tissues and organs. (CollPlant 13.01)
8.11 CLEW Secures Series B Fund Raising
CLEW has successfully concluded its Series B funding, bringing the total capital raised to over $20 million. CLEW develops an analytics platform for the healthcare industry aimed at the delivery of improved clinical and operational outcomes by predicting life-threatening complications and detecting deviations from the optimal clinical path. The financing will be used to commercialize CLEW’s platform in the TeleICU and critical care markets. The round was led by Pitango Venture Capital, Israel’s largest venture capital fund and included all existing investors with additional strategic participation from Relyens – a European mutual group insurance and risk manager specializing in the healthcare industry.
Netanya’s CLEW is a real-time AI analytics platform designed to help providers make better informed clinical decisions by predicting life-threatening complications across various medical care settings. With CLEW, healthcare organizations can improve outcomes and safety, streamline patient care, and efficiently handle regulations and penalties, ultimately lowering the cost of care. The platform uses machine learning and data science technology to develop patient-specific physiological, predictive models to deliver predictive warnings during all phases of a patient’s stay. (CLEW 15.01)
8.12 Emendo Biotherapeutics Advances Next Generation Genome Editing Therapeutics
Emendo Biotherapeutics announced a Series B investment totaling $61 million led by AnGes, a Japan-based biopharma, reflecting its strategic interest in partnering with Emendo on the development of specific indications. Emendo Biotherapeutics is pioneering OMNI, a next-generation allele-specific gene editing platform that uses synthetic biology to expand what is possible in genome-editing. In 2019, Emendo granted an option to Takeda to use the OMNI nuclease gene editing program for two research and development targets. Emendo received an undisclosed investment from Takeda Ventures that was converted in the Series B.
Emendo’s OMNI technology enables precision gene editing while maintaining high efficiencies, uniquely addressing dominant indications such as Severe Congenital Neutropenia (SCN), caused by mutations in the neutrophil elastase gene ELANE. Dominant indications represent the vast majority of genetic diseases which until now have been untreatable.
Nes Ziona’s Emendo Biotherapeutics is transforming the landscape of genome-editing based medicine through its use of novel CRISPR nucleases, advanced cutting-edge protein engineering platforms, diverse pipeline of clinical programs and extensive intellectual property portfolio. (Emendo 15.01)
8.13 Nanox Secures $26 Million Strategic Investment from Foxconn
Nano-X Imaging has secured funding of $26 million with participation of strategic investor Foxconn, bringing the total funds raised for the Nanox System project to $55M thus far. Foxconn is joining Fujifilm, SK Telecom, and other private investors, who have previously invested in the project, as part of a round that is aimed to support Nanox’s development, commercialization, and deployment of its Nanox System.
The Nanox System is composed of the Nanox.Arc, a novel digital X-ray device and the Nanox.Cloud, a companion cloud-based software that will be designed to provide an end-to-end medical imaging service, that is expected to include image repository, radiologist matching, online and offline diagnostics review and annotation, connectivity to diagnostic assistive artificial intelligence systems, billing and reporting. The Nanox System will promote early detection of medical conditions that are discoverable by X-ray. The company believes its unique digital X-ray source technology, combined with its planned software solution, will enable it to build medical imaging systems at significantly lower costs than existing medical imaging systems to promote early detection of medical conditions that are discoverable by X-ray and X-ray based imaging modalities such as CT, mammography, fluoroscopy and angiogram.
Neve Ilan’s Nanox is an Israeli corporation that is developing a commercial-grade digital X-ray source designed to be used in real-world medical imaging applications. Nanox believes that its novel technology could significantly reduce the costs of medical imaging systems and plans to seek collaborations with world-leading healthcare organizations and companies to provide affordable, early detection imaging service for all. (Nanox 16.01)
8.14 OncoHost & RayBiotech Awarded $1 Million BIRD Grant to Advance Precision Oncology
OncoHost, together with its partner, Atlanta’s RayBiotech, a leading life sciences company developing high-throughput protein detection technologies for biomarker discovery initiatives, announced the companies have been awarded a $1 million grant from the Israel-U.S. Binational Industrial Research and Development (BIRD) Foundation. The BIRD Foundation supports cooperation between U.S. and Israeli companies for developing joint products or technologies in a wide range of technology sectors that are of mutual benefit to the U.S. and Israel.
The grant will support OncoHost and RayBiotech’s combined development and clinical validation of host response testing for the early prediction of treatment responsiveness in non-small-cell lung carcinoma (NSCLC) patients undergoing immunotherapy. It will also be used to further develop and implement an automated slide assistance platform (ASAP) for reducing the time of large-scale protein processing as part of a new joint service: host response enrichment for pharmaceutical companies. Both of these developments will contribute towards the enablement of personalized cancer therapy for patients. OncoHost’s host response profiling platform PROphet
leverages proprietary machine learning and bioinformatics technology, and will be used together with RayBiotech’s high-throughput protein analysis platform to identify treatment resistance in cancer patients.
Binyamina’s OncoHost combines life-science research and advanced machine learning technology to develop personalized strategies to maximize the success of cancer therapy. Utilizing proprietary proteomic analysis, the company aims to understand patients’ unique response to therapy and overcome one of the major obstacles in clinical oncology today – resistance to therapy. OncoHost’s Host Response Profiling platform (PROphet) analyzes proteomic changes in blood samples to monitor the dynamics of biological processes induced by the patient (i.e., the host) in response to a given cancer therapy. (OncoHost 21.01)
8.15 Radiaction Raises $18 Million
Radiaction, which has developed a system that protects doctors performing catheterization and other surgical procedures under conditions of prolonged exposure to radiation, has raised $18 million. US private equity fund InnovaHealth Partners led the financing round.
Radiaction has developed a device that shields the radiation source, instead of the doctor. At present, the radiation source cannot be shielded, because the device must move around the patient and photograph him or her from many angles. Radiaction’s device also calibrates itself. At any angle at which the radiation source remains in one place, shielding walls emerge robotically, surround the radiation source, and form a partition between the radiation and the doctor. Initial studies conducted by the company showed that the device reduced radiation in the operating theater by over 90%.
Tel Aviv’s Radiaction is developing an innovative radiation shielding system that enables profound radiation protection to all personnel in the interventional suite, with higher protection levels than current gold standard of lead aprons and shields. The unique concept is to transfer the radiation shielding from the personnel to the fluoroscopy system itself and block the scattered radiation from its origin.(Globes 21.01)
9: ISRAEL PRODUCT & TECHNOLOGY NEWS
9.1 Fortune 100 Company Choses Silicom’s CPEs for Nationwide Deployment
Silicom announced that one of the U.S.’s largest healthcare chains has selected Silicom’s latest generation CPEs as a high-performance platform for its new organization-wide SD-WAN-based network. Silicom’s revenues from the first phase of the project, which will roll out the network to the client’s existing locations through 2020 and the first half of 2021, are expected to reach approximately $6 million. In following years, smaller deployments are expected to cover new locations as they are added.
Silicom’s unique capabilities were first brought to the customer’s attention by its SD-WAN software vendor, a leading SD-WAN industry player and a partner of Silicom, which has qualified Silicom’s latest generation CPEs as part of its worldwide strategy. Before making its final selection, the customer evaluated the Silicom product in a lengthy side-by-side comparison of its performance with that of a major competitor, confirming its superior performance.
Kfar Saba’s Silicom is an industry-leading provider of high-performance networking and data infrastructure solutions. Designed primarily to improve performance and efficiency in Cloud and Data Center environments, Silicom’s solutions increase throughput, decrease latency and boost the performance of servers and networking appliances, the infrastructure backbone that enables advanced Cloud architectures and leading technologies like NFV, SD-WAN and Cyber Security. Their innovative solutions for high-density networking, high-speed fabric switching, offloading and acceleration, which utilize a range of cutting-edge silicon technologies as well as FPGA-based solutions, are ideal for scaling-up and scaling-out cloud infrastructures. (Silicom 09.01)
9.2 Eltek Receives an Additional Order for up to $1.4 Million from a Governmental Authority
Eltek announced that a governmental authority has exercised its option to extend an earlier contract and placed a follow-on order to an existing project in an amount of up to approximately $1.4 million. The customer extended the project for an additional two years period, during which Eltek will be required to meet agreed milestones. Payments to Eltek shall be made subject to the fulfillment of each milestone. The extension of the project is expected to generate total aggregate revenues of approximately $1.4 million. In addition, to enable the execution of the project, the costumer shall lend the Company, for no consideration, equipment in a total value of approximately $630,000.
Petah Tikva’s Eltek is a global manufacturer and supplier of technologically advanced solutions in the field of printed circuit boards (PCBs), and is the Israeli leader in this industry. PCBs are the core circuitry of most electronic devices. Eltek specializes in the manufacture and supply of complex and high quality PCBs, HDI, multilayered and flex-rigid boards for the high-end market. Eltek has ITAR, AS-9100 and NADCAP Electronics permits and its customers include top of the line companies in the defense, aerospace and medical industries in Israel, the United States, Europe and Asia. (Eltek 09.01)
9.3 Aptiv Embeds Valens’ Chipsets in Its Smart Vehicle Architecture Platform
Valens has partnered with Aptiv to develop their Smart Vehicle Architecture (SVA) platform, which reduces the number of connections and individual devices within vehicles with a centralized, shared architecture, leading to increased flexibility and redundancy, and reducing total system costs. Valens’ technology enables the transmission of ultra-high-speed data over a simple infrastructure (such as UTP) for long-distances (15m/50ft), simplifying in-vehicle connectivity and supporting centralized and remote computer systems. Valens allows for the convergence of a range of interfaces, including PCIe, Ethernet, audio and controls over the same link. Valens’ chipsets are embedded into the SVA’s PowerData Center (PDC) modules.
Hod HaSharon’s Valens Automotive, a division of Valens, was established in 2015 with the goal of delivering the world’s most advanced chipset technology for in-vehicle connectivity. Valens Automotive chipset enables highly resilient, ultra-high-speed in-vehicle connectivity, converging a range of interfaces (such as audio & video, Ethernet, USB, controls, PCIe, power) over a simple infrastructure (such as a single UTP wire). Valens’ patented technology is used by the world’s largest audio/video component manufacturers, enabling the highest quality of connectivity. (Valens 09.01)
9.4 Watergen’s GENNY Wins Award for Its Innovative Water-From-Air Solution
Petah Tikva’s Watergen’s GENNY, a new water-from-air appliance, has been named winner of the Energy Efficiency Product of the Year in the 2020 Smart Home Mark of Excellence Awards at CES in Las Vegas. Presented annually during CES by the Consumer Technology Association (CTA), the Mark of Excellence Awards recognize the industry’s top smart home innovations that mutually benefit homeowners and integrators.
Watergen’s GENNY is a water-from-air system for the home or office that is able to create fresh drinking water from air. GENNY eliminates the need for consumers to restock water through purchasing bottled water or, as popular in office settings, to have water jugs delivered at necessary intervals, thus significantly cutting back on plastic usage. Because GENNY creates water from air, an unending resource, water is always available on demand. More, the water produced by GENNY provides consumers with higher quality water than the water that runs through filtration systems attached to municipal water lines. GENNY eliminates concerns of corroded water pipes that could lead to higher-than-normal levels of lead in drinking water. Watergen’s GENNY additionally works as a home air purifier circulating clean air back into the room as part of the water generation process. (Watergen 08.01)
9.5 Orbit Develops New Multi-role 12-inch Ka-Band Airborne Terminal for Inmarsat
Orbit Communication Systems and the UK’s Inmarsat, the world leader in global, mobile satellite communications, announced the development of an innovative new Ka-band multi-purpose airborne terminal. The compact Multi-Purpose Terminal (MPT) 30WGX, featuring a 30-cm (12″) antenna, will be able to deliver high-throughput wideband communications via the Inmarsat Global Xpress worldwide network for a broad range of airborne platforms. Built to fulfill “anytime, anywhere” connectivity requirements, the lightweight, small-footprint terminal combines high performance with Orbit’s industry-leading reliability to address new opportunities in military aircraft and Unmanned Aerial Vehicles (UAVs). Following certification, volume production of the terminal is planned for Orbit’s US-based facilities.
Orbit’s MPT 30WGX terminal complements its 46-cm (18″) MPT 46WGX terminal, which will shortly enter full-scale production. Once certified, it will be similarly optimized for use with Inmarsat’s Global Xpress system and will be interoperable with military Ka-band services, affording unique capabilities and flexibility.
With over 1,600 terminals delivered, Orbit offers a range of versatile and highly reliable airborne satellite communications systems. The AirTRx and MPT series offer a choice of multiple antenna sizes, frequency bands and profiles, and are operational on a wide range of airborne platforms such as commercial airliners, business jets, military aircraft, helicopters and UAVs. The systems are offered in Ku, Ka and X-band and provide outstanding RF, tracking and inter-satellite transition performance in harsh operating environments.
Netanya’s Orbit Communication Systems, a leading global provider of airborne communications and satellite-tracking maritime and ground-station solutions, is helping to expand and redefine how one connects. Orbit systems are found on airliners and jet fighters, cruise ships and navy vessels, ground stations and offshore platforms. They deliver innovative, cost-effective, and highly reliable solutions to commercial operators, major navies and air forces, space agencies and emerging New Space companies. (Orbit 14.01)
9.6 Ben-Gurion University Researchers Introduce Sensor for Real-time Measurement of Soil Nitrate
BGN Technologies, the technology transfer company of Ben-Gurion University of the Negev (BGU), Israel, introduced a new technology for direct, real-time and continuous measurement of nitrate in the soil. The invention relies on an optical nitrate sensor that is based on absorption spectroscopy. The technology enables continuous, real-time, measurement of nitrate in the soil pore-water and is highly resistant to harsh chemical and physical soil conditions. The sensor can detect nitrate concentrations in the range of tens to hundreds of parts per million (ppm), which is the rage relevant for growing crops. Its ability to continuously monitor soil nitrate levels produces a highly detailed portrayal of the rapidly changing concentrations of nitrate in the soil solution.
Natural nitrate levels in groundwater are generally very low. However, excess application of fertilizers in agriculture often result in leaching of nitrate from the soil to water resources. Increased level of nitrate in water is one of the main reasons for disqualification of drinking water, causing a worldwide environmental problem.
BGN Technologies is the technology company of Ben-Gurion University, Israel. The company brings technological innovations from the lab to the market and fosters research collaborations and entrepreneurship among researchers and students. To date, BGN Technologies has established over 100 startup companies in the fields of biotech, hi-tech, and cleantech as well as initiating leading technology hubs, incubators, and accelerators. (BGN Technologies 13.01)
9.7 Elbit Systems Successfully Demonstrates High-Altitude Aerial Firefighting Solution
Elbit Systems completed a successful field demonstration of its patented Hydrop system, an innovative solution enabling high-altitude high-precision aerial firefighting. The field demonstration took place recently as part of an exercise led by the Israel Fire and Rescue Authority. During the exercise two Air Tractor aircraft from the Israeli Fire Fighting Squadron were directed to extinguish a burning field, from as high as 500 ft., more than four times higher than the average altitude of a standard aerial firefighting sortie. Using the Hydrop system each aircraft launched 1.6-tons of 140-gram liquid pellets in a computed ballistic trajectory, achieving a precise hit with saturation of 1-2 liter per 1 square meter.
With Helicopter, Fixed-wing and Heavy Lifter configurations, Hydrop integrates fighter aircraft avionics including a ballistic computer, command and control (C2) system and advanced display systems, together with liquid pellets stored in a specially designed airborne dispenser. The C2 unit navigates the aircraft to the drop point while the ballistic computer produces an accurate launch trajectory, taking into account aircraft velocity, altitude, GPS location, wind conditions and the weight and shape of the liquid pellets. In addition to lifting the restriction on nighttime aerial firefighting, this high-altitude system improves pilots’ safety and increases the effectiveness of aerial firefighting, during day and night, by eliminating the liquid loss caused by the aerosol effect.
The Hydrop system includes a pellets manufacturing machine (static or mobile). Housed in a standard 20′-container, the manufacturing machine can produces up to 10 tons of pellets per hour. The biodegradable pellets which can be filled with either water, foam or fire retardant, have been proved to have no harmful residues and their dropping has also been tested and found to be safe to crews on the ground.
Haifa’s Elbit Systems is an international high technology company engaged in a wide range of defense,homeland security and commercial programs throughout the world. The Company, which includes Elbit Systems and its subsidiaries, operates in the areas of aerospace, land, and naval systems, command, control, communications, computers, intelligence surveillance and reconnaissance, unmanned aircraft systems, advanced electro-optics, electro-optic space systems, EW suites, signal intelligence systems, data links and communications systems, radios and cyber-based systems and munitions. (Elbit Systems 21.01)
10: ISRAEL ECONOMIC STATISTICS
10.1 Israel’s Inflation Rate Increases by 0.1% in December
Israel’s Consumer Price Index (CPI) rose 0.1% in December, the Central Bureau of Statistics reported, as the pundits predicted. In 2019, the index rose 0.6%, well below the government’s 1% – 3% annual inflation target range. Clothing prices rose 1.6% in December, while fresh fruit and vegetable prices fell 3.7% and culture and entertainment prices fell 1.5%. The housing price index rises are gaining momentum. Home prices in the October-November period rose 0.5% in comparison with September-October. Home prices have risen 3.4% over the past 12 months. (CBS 15.01)
10.2 Tel Aviv Ranked World’s 20th Most Expensive City
Globes reported that Numbeo has ranked Tel Aviv as the world’s 20th most expensive city in 2020, down from 18th last year. Tel Aviv scored 86.36 on the Numbeo’s cost of living index, placing it between Oakland, California in 19th place (86.51) and Copenhagen in 21st place (86.23). Haifa (80.29) is the world’s 31st most expensive city – the same ranking as last year – followed by Chicago in 32nd place, Osaka, Japan in 33rd. place and Jerusalem (79.42) in 34th place. Jerusalem was in 33rd place last year.
The world’s five most expensive cities are all in Switzerland – Zurich, Basel, Lausanne, Geneva and Bern followed by three Norwegian cities Stavanger, Oslo and Strondheim, followed by Icelandic capital Reykjavik in 9th place and Bergen, Norway in tenth place. Five US cities are in 11th to 15th places: New York, San Francisco, Anchorage, Honolulu and Brooklyn, followed by Aalborg in Denmark, Washington DC, Tokyo and Oakland. (Globes 19.01)
11: IN DEPTH
11.1 ISRAEL: Summary of Israeli High-Tech Companies Capital Raising – 2019
On 8 January, IVC and ZAG-S7W announced that Israeli high-tech companies raised $39.1 billion in 2010–2019. In 2019, Israeli tech companies raised $8.3 billion in 522 deals. Since 2010, capital raising by Israeli tech companies has grown by a whopping 400% and the number of deals by 64%.
The trend of the last years was apparent also in 2019, the total amount of capital grew much faster compared to the number of deals. The total amount raised by Israeli high-tech companies increased 30% compared to the 2018 amount of $6.35 billion. The number of deals declined from 2018’s 532 deals.
In Q4/19, Israeli tech companies raised $2.29 billion. While the total amount raised in Q4 was the highest since 2012, the number of deals declined to 122.
Marking a decade of extensive growth, VC-backed deals raised a record amount of $6.4 billion in 2019 compared to $4.75 billion in 2018 and $1.13 billion in 2010. The number of deals with VC participation captured 60% of the total number of deals in 2019. The dollar volume of deals in which VCs took part captured 77% of the total raised in 2019.
Adv. Shmulik Zysman, Managing Partner & high-tech industry leader at Zysman, Aharoni, Gayer & Co. (ZAG-S&W), said: “2019 marked a record year, capping a decade of successive increases in capital invested in the Israeli high-tech industry. The final quarter of 2019, and the entire year of 2019, symbolize the clear and consistent trend of the Israeli high-tech industry: tremendous growth and frequent record breaking. This growth is partly due to the growing foreign capital invested in the Israeli high-tech industry. Israeli funds are also taking part, with total investments of these funds in 2019 more than 30% higher than in 2018. An interesting characteristic of the boost is the annual increase of tens of percent in capital raising in a wide range of fields, from software and the internet through life sciences to semiconductors.”
At the same time, added Zysman, the phenomenon of “venture capital with less risk, which we pointed out last year and throughout this past year, has unfortunately turned from a warning sign into a real, alarming trend. In the past year, not only has the relative share out of total investment in early stage companies declined, but also the total capital invested in these companies has decreased.”
According to Zysman: “It’s easy to remain optimistic, however, when in the last year the total capital raised by the Israeli high-tech industry was more than 30% higher than in 2018. Another reason for optimism is that we have recently noticed many investors dedicated to investment in early stage companies. These are positive signs that we hope to see in the coming quarters.”
Capital Raising by Rounds
Seed is the only type of round that has shown a downward trajectory toward the end of the decade, in both amounts and number of deals: Seed round amounts shrank in 2019 to $148 million compared to $169 million in 2018.
The number of Series A deals jumped by 300% during 2010–2019, while the capital raised by them soared eight-fold compared to 2010. In 2019, later rounds continued to attract large amounts of capital, raising $2.87 billion compared to $1.91 billion in 2018.
Capital Raising by Deal Size
Mega rounds (more than $50 million) peaked in 2019 with 41 deals capturing 50% of the annual capital inflow. All companies that attracted more than $100 million each – 20 deals overall in 2019 – were in growth stages, mostly in the software sector.
Mid-size deals ($10 million – $50 million) have also stood out. The number of smaller deals (up to $1 million) shrank to 17% of the total number of deals in 2019, compared to 24% in 2010.
Guy Holzman, IVC CEO said: “More Israeli companies in the growth stage aim to become their market’s leader. The continual increase in the amounts invested in mature start-ups is due to new investors, such as Israeli and foreign Private Equity funds. Furthermore, IVC noticed a decline in the number of newly established companies. We believe that both trends will continue in 2020”.
Capital Raising by Sector and Selected Clusters
Artificial intelligence companies’ capital raising has skyrocketed over the past decade, reaching $3.7 billion in 199 deals in 2019. Eighteen deals, each over $50 million, accounted for 55% of the amount.
Cyber security tech companies raised $1.88 billion. Deal numbers retained 2018 levels. Fintech companies attracted $1.7 billion. The number of deals kept the five-year average.
The software sector continued to lead capital raising in 2019, reaching $4.4 billion in 2019, an increase of almost 50% compared to 2018. The increase was due to 26 deals, each over $50 million, which captured 58% of the total amount raised in the software sector. Life sciences companies raised $1.37 billion in 121 deals in 2019 compared to $1.17 in 102 deals in 2018
Israeli Venture Capital Funds
Israeli VC funds’ share in the capital raising declined during the past decade to $1.1 billion in 2019, a 13.3% share of the total amount. The level of number of deals by Israeli VCs in 2019 remained in the mid-range for 2010–2019.
Predictions for 2020
Barring any dramatic changes in the macroeconomics conditions, the Israeli private market will continue to attract investors. Therefore, IVC estimates that the allocated capital for large and more established companies will continue to grow.
The number of first investments is expected to continue the slowdown. This trend, first recognized in 2018, expanded in 2019 and will not change course in the coming year.
AI and cyber-security tech companies will continue to be the most attractive for investors. Several Israeli start-ups made IPOs in 2019, and the pre-IPO rounds in 2019 suggest that more companies will explore the IPO option in 2020.
About the authors of this report:
IVC is the leading online provider of data and analysis on Israel’s high-tech & venture capital industries. Its information is used by key decision-makers, strategic and financial investors, government agencies, and academic and research institutions in Israel.
ZAG-S&W (Zysman, Aharoni, Gayer & Co.) is an international law firm with offices in Israel, the United States, China, and the United Kingdom. The firm’s attorneys specialize in all disciplines of commercial law for both publicly held and private companies, with particular expertise in hi-tech, life science, international transactions, and capital markets. (IVC 08.01)
11.2 ARAB MIDDLE EAST: Arabian Country Startups Shine as 2019 Breaks Investment Records
MAGNiTT reported on 15 January that Forbes Middle East found that 2019 marked a record year for startups in Arab countries, with key indicators including the number of investments, number of exits, and the total number of investors investing in MENA-based startups hitting new highs. According to the 2019 MENA Venture Investment Report by MAGNiTT, a regional startup platform, the number of investments in MENA-based startups was up 31% from 2018. 2019 also saw 564 investments in MENA-based startups amounting to $704M in total funding, up 13% compared to 2018, excluding previous mega-deals in Souq & Careem, the report adds.
MAGNiTT CEO, Philip Bahoshy, attributes the heightened activity to the sheer increase in the number of startups in the region being established that are also seeking investment. “You are seeing more international and regional investors than ever before that are looking to deploy capital. It is also becoming easier for companies to set up their businesses in different geographies. As exits continue to grow, you see more paths to growth and success, which makes it more interesting for investors to commit money to,” Bahoshy adds.
Regional Standouts
With its large market size, Egypt has seen a steady increase in the number of investments over the last few years. In 2019, the country surpassed others to rank first by the number of deals across MENA for the first time – 25% of all deals. The UAE maintained its historical dominance as the largest recipient of total funding (60%) thanks to continued government support, corporate venture interest and growing investor appetite for startups headquartered in the UAE.
However, the landscape continues to evolve and other ecosystems are beginning to emerge. A good example is Saudi Arabia, the fastest-growing ecosystem across MENA, which now ranks third in both the number of deals and total funding in the region.
Saudi Arabia’s Vision 2030 ranks SMEs’ growth as one of its key pillars, Bahoshy observes. “There is a concerted effort across the whole of the government, as well as the private sector, to boost entrepreneurship and innovation.” “Saudi Arabia benefits from a much larger population, large geographical area and a focus on digital transformation. This is the perfect environment for startups to flourish. We anticipate that this growth (in Saudi Arabia) will continue to accelerate, especially when you see announcements like Jada, a $1.07 billion fund of funds by Saudi’s PIF that seeks to invest in startups and SMEs,” Bahoshy adds.
This public-sector support is evident all across the region. “Many of the governments across the region are focusing on digitalization, entrepreneurship and innovation. As governments look beyond natural resources to grow their economies, it’s only natural that startups are seen as a solution for diversification and economic growth. Therefore, money is being invested in startups to achieve this goal,” says Bahoshy.
Exits
Last year saw more exits take place than ever before across MENA, at 27. Uber’s $3.1B acquisition of Careem became the first unicorn exit in the MENA region.
As more startups are created in different types of industries, a few outcomes emerge, Bahoshy observes. First, several industries in the region, including e-commerce and transport, are heavily fragmented, and investors and startups are looking to consolidate so they can compete at a regional level, if not at the international, level.
Secondly, corporates are starting to become more interested in the entrepreneurship space and looking to acquire startups as they become more digitalized. Third, as the Middle East sees more success stories such as the acquisition of Careem by Uber as well as of Souq.com by Amazon, international investors, corporates and large multinationals begin to look at the Middle East as a new opportunity to build a geographical expansion to the MENA region, Bahoshy adds.
Indeed, a record of 212 institutions invested in MENA-based startups in 2019. The average ticket size was up by 7% across all deals in 2019. Moreover, 2019 saw the emergence of non-traditional tech investors such as corporates, PEs, family offices and asset managers, which saw a 39% increase from last year. 2019 also saw an increase in international investor participation. A quarter of all entities that invested in MENA-based startups were based outside of the MENA region, marking a new record high.
Bahoshy notes many of the top-funded startups in the region solve basic infrastructure issues, using technology to digitalize them. The delivery and transport industry accounted for the highest amount of funding of any industry at 19%, as bus transportation startups such as Swvl ($42M) and trucking startups such as TruKKer ($23M) raised sizable funding rounds.
FinTech retained its top spot in 2019 and accounted for 13% of all deals, according to the MAGNiTT report. About half of all deals in FinTech last year were in the payments and remittances space, leveraging the large expat population in the region. (Forbes Middle East 15.01)
Back to Table of Contents
11.3 UAE: Technavio Reports on the Education Market in UAE for 2018-2022
The education market in UAE is expected to post a CAGR of almost 5% during the period 2018-2022, according to the latest market research report by Technavio.
Growing awareness and rising importance of education in the UAE has led to a significant rise in the number of enrollments at various levels including PreK-12, high school and graduate levels. Moreover, educational institutions in the country are providing various facilities to further increase the number of student enrollments. For instance, several schools are offering discounts for students joining in the inaugural year. Institutions are also offering scholarships and reduced fees for siblings to increase student enrollments. A number of such factors are driving the growth of the education market in the UAE.
As per Technavio, the rising awareness of early education will have a positive impact on the market and contribute to its growth significantly over the forecast period. This research report also analyzes other important trends and market drivers that will affect market growth over 2018-2022.
Education Market in UAE: Rising Awareness of Early Education
Over recent years, UAE has witnessed a significant rise in the demand for kindergartens and pre-primary schools owing to the increasing number of working women and dual-income households. Many institutions in the country are introducing various activities in their curriculum to develop curiosity, knowledge, and imagination among children aged 3 years and above. The country is also introducing various initiatives to educate toddlers in competitive settings and give them a head-start. UAE Vision 2021 is one such initiative, which focuses on delivering early education programs that help nurture long-term economic growth and social sustainability. Therefore, the rising awareness of early education is expected to have a positive impact on the growth of the market during the forecast period.
“Technological advances in the education sector, evolving learning methodologies, and the proliferation of online education and digital literacy will further boost market growth during the forecast period,” says a senior analyst at Technavio.
Education Market in UAE: Segmentation Analysis
This market report segments the education market in UAE by end-users (K-12 education and higher education) and ownership (private education and public education). The K-12 schools segment led the market in 2017, followed by the higher education segment. During the forecast period, the K-12 schools segment is expected to maintain its dominance over the market. This is due to the increasing emphasis on early education and growing awareness about the importance of girl’s education in the country.
Technavio is a leading global technology research and advisory company. Their research and analysis focus on emerging market trends and provides actionable insights to help businesses identify market opportunities and develop effective strategies to optimize their market positions. (Technavio 15.01)
Back to Table of Contents
11.4 SAUDI ARABIA: The Saudi Aramco IPO – Strategic Significance
Shmuel Even, Tomer Fadlon, Yoel Guzansky posted in INSS Insight No. 1250 on 16 January 2020 that in December 2019, Saudi Arabia went public with Aramco, the world’s biggest oil company, and was thus forced to share a partial source of its wealth with others.
The IPO is designed to raise funding for the Vision 2030 plan, whose goals include reducing the kingdom’s reliance on oil revenues by shifting investment capital to other sectors. Yet the scale of the IPO (1.75% of company shares) and the sum raised are far from meeting the country’s vast needs. Iran’s attack on the company’s facilities in September 2019 has not eluded the attention of Western investors, who apparently have a limited stake in the IPO. The more such security incidents continue, so will Saudi Arabia find it hard to attract investments critical for its future. At least from this standpoint, the Saudi interest is in reducing tensions with Iran and ending the war in Yemen.
Saudi Aramco, or Aramco, is Saudi Arabia’s national oil company. The company specializes in oil and natural gas exploration, production, and refinement, as well as the petrochemical industry. Aramco, the Saudi crown jewel, is the world’s biggest oil company and owns some of the world’s biggest oil fields.
The company’s 2018 financial reports note $356 billion in sales revenues, $213 billion in pre-tax profits, and around $111 billion in net, post-tax profit. In the first nine months of 2019, Aramco reported net profits of $68 billion, such that its 2019 earnings are lower. The company’s debt-to-equity ratio is lower than that of other leading oil companies in the world, which is obviously in its favor. State revenue from the company is derived both through taxation and profit dividends. In 2018, Aramco paid the state $102 billion in tax, and in March 2019 the company paid the state dividends amounting to $33 billion.
Saudi Arabia’s dependency on oil produced by Aramco is almost absolute, given that oil accounts for some two-thirds of state revenues. These revenues allow it to subsidize high quality basic services, such as education and health, and maintain high defense spending. Saudi Arabia’s defense budget for 2020 is 182 billion riyal (around $49 billion), approximately 4.7% less than the 2019 budget. The Saudi defense budget represents some 17.8% of the kingdom’s budget and is among the highest defense budgets globally. Thus Aramco’s revenues are vital for the kingdom’s security and prosperity.
As the world’s biggest oil company, Aramco also has great importance for global energy equilibrium. According to OPEC data, in 2018 Saudi Arabia produced a daily average of 10.3 million barrels of oil, accounting for 13.4% of global oil production, and the kingdom has 267 billion barrels in proven oil reserves, accounting for 17.8% of proven oil reserves globally.
The Aramco IPO is directly linked to Saudi Arabia’s Vision 2030, launched in 2016. The plan’s main goals include reduced reliance on oil revenue, inter alia, by shifting capital from the oil sector toward investment in other sectors. This proposed shift is in response to threats to the oil sector, led by price instability, increased oil and gas discoveries outside the kingdom, the development of oil substitutes and means of energy conservation and security risks that require redistributing investments outside of the country. Because the kingdom has not found a way of funding the plan through regular revenues and debt offerings alone, it was forced to look to the Aramco IPO as a source of funding.
The original intent in 2016 was to issue 5% of Aramco shares at a company valuation of at least $2 trillion – or in other words, to raise at least $100 billion. But the IPO, slated for 2018, was postponed, apparently for several reasons: oil prices that were lower than what the Saudis had predicted, Saudi misgivings about the required increase in transparency and the charged environment given suspicions against Saudi Crown Prince Mohammed Bin Salman, who is identified with the IPO, regarding his involvement in the murder of the journalist Jamal Khashoggi (October 2018).
In April 2019, Aramco bought 70% of shares of the Saudi petrochemical company Sabic for $68 billion, with money from the kingdom’s investment fund. To help fund the purchase, Aramco raised some $10 billion by issuing dollar bonds. To that end, Aramco published a forecast with details about the company and its financial situation, even before the publication of the IPO forecast.
The Aramco IPO ultimately occurred in early December 2019 at the Tadawul, the local Riyadh stock exchange where the kingdom wields more control, in contrast to the world’s leading exchanges that are preferred by foreign investors. The IPO was for 1.5% of the company shares, at a price of 32 Saudi riyals ($8.53) each, in accordance with a company valuation of $1.7 billion (less than initial Saudi predictions), such that it yielded the Saudi state $25.6 billion.
On 12 January 2020 Aramco said it had exercised its option to sell an additional 450 million shares, raising the size of its IPO to a record $29.4 billion (1.75% of the company). That same day, the share price was 34.8 riyals (company valuation of some $1.85 trillion), some 9% more than the IPO price. From the standpoint of the global capital market, though only a small portion of company shares were offered, the IPO is considered the world’s biggest and Aramco is the most valuable publicly-traded company in the world.
The IPO was designed to raise higher-yielding capital than other investments, including those that would provide more of a response for the needs of the labor market or additional investments abroad that would diversify Saudi Arabia’s sources of revenue. Yet this logic does not cohere with the limited scope of the IPO, as it addresses a small portion of Saudi Arabia’s needs in general and the investment needs of the Vision 2030 plan in particular. In early 2019, within the Vision 2030 framework, the Saudis presented an investment plan amounting to $450 billion over the coming 11 years, intended to reduce oil dependency and create 1.6 million jobs. During 2019 the International Monetary Fund warned Saudi Arabia that it must create one million new jobs over the coming five years (with the unemployment rate among Saudi citizens now standing at more than 12%). In addition, in December 2019 the planned budget deficit was reportedly 6.4% of GDP, compared to 4.7% – the effective deficit-to-GDP ratio in 2019. Clearly the need to create sources of revenue as alternatives to oil necessitates a major redirection of resources, beyond the capital yielded by the IPO.
Therefore, it appears that the scale of the IPO and the choice of its location were the result of a compromise, with the IPO itself mainly serving as proof of clinging to a Saudi economic strategy led by Bin Salman. One way or another, the IPO opened up a path to additional fundraising through further offerings of company shares.
The kingdom’s decision to share its oil wealth is not to be taken for granted, as the share offer reduces the kingdom’s relative leverage in the Aramco company and requires a high level of transparency. The success of the IPO will be gauged by how the Saudi leadership uses the money raised. Success will constitute investment of IPO funds in prospects outside the local oil sector that contribute to employment and yield profits greater than the expected profit-loss from the share offer. Failure will constitute a use of the money to pay for routine expenses.
To judge from media reports, most of those buying the shares were from Saudi Arabia and other Gulf states, whom the royal household had urged to buy shares; only a small portion of the Aramco shares were bought by investors outside the region. This followed reluctance on the part of Western investment managers to recommend buying the company’s shares, apparently because the IPO was conducted at a local exchange and given the enhanced risks facing the company and the kingdom in the wake of Iran’s 14 September 2019 attack on the Aramco oil facilities. The attack temporarily cut Aramco’s oil production by more than half. After that incident, Fitch reduced the credit rating of Saudi Arabia and Aramco from A+ to A.
Should such attacks continue, there will be serious consequences for the company and for the willingness of foreign investors to invest in the kingdom at all, with its inherent stability risk. From this standpoint, the security risk bolsters the kingdom’s interest in calming tensions with Iran and extricating itself from the war in Yemen. At the same time, it lends weight to the kingdom’s calculations for reducing its enormous dependency on the oil sector, which is sensitive both to developments in the global energy market and to security incidents. (INSS Insight 16.01)
11.5 OMAN: The End of the Qaboos Era
On 13 January, Yoel Guzansky and Efraim Halevy posted in INSS Insight that Oman faces a test of stability following the passing of its leader of the past half century, Sultan Qaboos bin Said al-Said. For years, the Sultanate’s stability was ensured thanks to Qaboos’s sober and carefully balanced policy,centering on equilibrium and mediation between hostile neighbors, while striving to maintain a neutral image. However, following his death, other elements, especially regional actors, may try to increase their involvement and influence in the sultanate, which possesses abundant natural resources and a strategic location. Oman’s approach to Israel and the history of special relations between the states dating back to the 1970s are part of the Sultanate’s foreign policy, which, based on considerations of survival, was exceptional in the regional arena. The Sultan’s successor, Haitham bin Tariq al-Said, is expected to adhere to this policy and maintain close relations with Israel.
The reign of Oman’s Sultan Qaboos bin Said al-Said was much longer than the reigns of other Arab rulers. He rose to the throne in 1970, after ousting his father from power with the help of a group of retired British army officers in a mission sanctioned by a mainstream group within the ruling Conservative Party in London.
At the time, the Soviet Union had gained a foothold in Yemen and helped establish the People’s Democratic Republic of Yemen. This entity promptly provided assistance to a “popular” uprising in the Dhofar region in south Oman. However, the British feared that the move would set off a domino effect, leading to Soviet control of the Arabian Peninsula, including the Strait of Hormuz, the world’s most important maritime crossing. In the 1960s, a group of British officers operated in Yemen with the help of Israel, which parachuted fourteen arms drops to royalist forces in the country, strengthening their hand in the battle against the republicans, who in turn were supported by an Egyptian expeditionary force (the Egyptian failure in Yemen dealt a harsh blow to the morale of the Egyptian army, which resonated in the Six Day War of 1967).
Qaboos held all the key portfolios of the Oman government, and hence the concern for the political stability of the sultanate. Moreover, many Omanis, most of whom were born after Qaboos came to power, identify the sultanate with him. The popularity he enjoyed throughout his reign was also thanks to his success in extracting the country from international isolation and his modernization of what was a backward state. When Qaboos took power, Oman had only three schools and 10 kilometers of roads.
Unlike other Gulf monarchs, Qaboos had no offspring and no brothers. One of the reasons that Qaboos did not name his successor during his lifetime was likely related to disputes among his relatives over the issue of succession and due to his concerns that this could spark a political crisis. Following Qaboos’s death, in accordance with the constitution he drafted, a pre-prepared letter was opened in which he named his 65-year-old cousin Haitham, the minister of culture and heritage, as his heir. Haitham seems to have popular support, although a political crisis is still possible, as conflicts may arise between the various branches of the family, or between the family and the military.
Apart from establishing his role, Haitham faces a number of other challenges, led by an ongoing economic crisis and the need to balance hostile neighbors.
Economic Crisis: With the exception of a number of localized violent incidents, Oman has managed to avoid regional upheavals and maintain its stability. However, the government, which generates around 80% of its revenues from oil, has had difficulty balancing the need for economic reforms with the need to provide requisite welfare services to its citizens in order to maintain the status quo; this difficulty has been compounded by low oil prices. During the years of his reign, Qaboos diverted Oman’s oil revenues to extensive development projects, but Oman’s oil and foreign currency reserves are relatively small compared to those of its Gulf neighbors. Therefore, alongside attracting investment and requesting additional aid from its wealthy neighbors, the sultanate began to privatize its electricity and oil sectors, including to investors from Malaysia and China. In February 2017 and again in January 2018, there were localized demonstrations in Oman calling for reforms, in particular economic reforms. Omanis are frustrated by the economic situation and strive to play a more significant role in the management of state affairs, but at the same time seek to avoid the bloodshed and chaos that have affected many countries in the region. Thus, they have refrained from blatantly challenging the government: among the demands made during the protests, calls to topple Qaboos were conspicuously absent. The government, in response to the demonstrations, has tightened its oversight of the population, especially on social networks.
Balance: To compensate for the sultanate’s relative weakness, Sultan Qaboos implemented a singular foreign policy. To maintain an image of neutrality, for example, Oman did not join Saudi Arabia and the UAE in 2015 in the war in Yemen, nor has it participated in their boycott of Qatar since 2017. Of the Gulf states, Oman has a unique sectarian composition in the region: most of its residents belong to a moderate Muslim sect – the Abadia – who are distinct from Shiite and Sunni Muslims. Perhaps because of this, Oman is the only Arab state that did not see any of its population joining the Islamic State (IS). Moreover, Oman maintains close relations with Iran, with which it shares control of the Strait of Hormuz. Relations between the two countries have grown stronger since Hassan Rouhani was elected President of Iran (2013) and Oman has leveraged these ties vis-à-vis Saudi Arabia and the UAE, which seeks to influence the sultanate to align with them. Riyadh and Abu Dhabi accused the sultanate, inter alia, of supporting Qatar and the Houthi insurgents. Oman, which has tense ties with the UAE, accused the latter of conducting espionage on its territory, and in April 2019, prosecuted five UAE nationals on such charges. Interestingly, Mohammed bin Zayed, the current heir and acting leader of the UAE, visited Oman in December 2019 while Sultan Qaboos was undergoing medical care in Belgium. Qaboos’s close ties with Iran also contributed to the formulation of the nuclear agreement with Iran. Oman continues to assist in contacts between Iranian, Saudi and American figures.
Oman and Israel
After Qaboos came to power, the British initiated ties between Israel and Oman, which at the time was dealing with an invasion from Yemen into the Dhofar region in the south of the sultanate. British and Iranian aid (during the Shah’s rule, prior to the Islamic Revolution) was supplemented by Israeli military and political advice, as well as Israeli help in providing solutions to the water shortage in the sultanate.
After some twenty years of secret and sensitive relations between Oman and Israel, there was a positive shift in the ties between the two countries following the signing of the 1994 peace agreement between Israel and Jordan. That same year, Prime Minister Yitzhak Rabin, who wanted to infuse a regional dimension to the historic agreement, arrived in Muscat on a direct flight from Tel Aviv. News of the visit and the meeting between Rabin and Qaboos was published with the agreement of both parties. Oman was the first of the Gulf states to approve the establishment of an Israeli diplomatic mission. Following that, delegations were set up in other countries in the region, but the momentum slowed in the first and second decades of the 21st century, in part due to the political stalemate on the Israeli-Palestinian front. However, some of the Gulf states currently allow economic-trade collaborations with Israeli entities, as well as Israeli participation in international sporting events and in conventions taking place in their territory. Oman was a pioneer in this regard and was heavily involved in developments.
Oman also played a part in the Saudi peace plan. The initiative, promoted by Saudi Crown Prince and heir Abdullah bin Abdulaziz al-Saud, laid out terms (via journalist Tom Friedman) for peace and normalization between the Arabs and Israel. The Saudis sent a message to Prime Minister Ariel Sharon via Oman together with a request that Israel not reject the initiative outright. Prime Minister Sharon accepted the request and said only that he would not respond to media interviews.
Prime Minister Benjamin Netanyahu conducted an official visit to Muscat in 2018 and according to reports en route flew over Saudi airspace. The Palestinian question was raised during talks between Netanyahu and Sultan Qaboos, but the Omani host did not pressure Israel on the matter. Questioned by a Palestinian representative at an event following Netanyahu’s visit, an Omani spokesman said that given that for seventy years the Palestinians had not been able to advance their claims against Israel, they would do well to seek new and different formulas that were in line the spirit of the time. In essence, the Palestinians were told to think of something else.
Haitham has some economic experience (he headed the Oman Vision 2040 committee) and also has a diplomatic past, having served as Secretary General of the Foreign Ministry. In addition, he enjoys considerable legitimacy as Qaboos’s choice. However, he takes over the role of sultan after Qaboos created the state in his image for 50 years. Haitham was favored over his brother, Assad, who was appointed Deputy Prime Minister in 2017 and was regarded by many as Qaboos’s successor. In his first speech as sultan, Haitham promised to continue on Qaboos’s path, to develop the country, and to maintain the sultanate’s unique foreign policy. “We will continue to assist in resolving disputes peacefully,” he added. Haitham assumes his role at a time when tension between the United States and Iran runs high, and thus Omani mediation is more crucial than ever. Sultan Haitham is likely to follow his predecessor’s path and continue, for example, to maintain close ties with Iran on the one hand and with Israel on the other. But first and foremost, he will have to establish his rule and deal with the economic and political challenges faced by the sultanate. (INSS Insight 13.01)
Back to Table of Contents
11.6 OMAN: Qaboos Successor Must Focus on Economic Prioritization
Robert Mogielnicki posted on 13 January in the Arab Gulf States Institute in Washington that Oman’s political transition presents the new sultan and his government with a choice to maintain the status quo of economic policy or undertake a deeper, structural transformation of the energy-dependent economy.
The death of Sultan Qaboos bin Said marks the end of his 5-decade rule over Oman. Haitham bin Tariq al-Said, a cousin of Qaboos, was named as his successor in a smooth transition of power. Qaboos’ successor assumes leadership at a time of pronounced regional tension, and his country occupies a precarious position within a fractured Gulf Cooperation Council. Yet responsibility for Oman’s socioeconomic challenges falls entirely upon the shoulders of the new sultan. It is in the domestic politics and economic policy realm where the ultimate success of Haitham’s leadership will be determined.
Although the royal court announced that Qaboos was in “stable condition,” throughout December 2019, it was common to hear Omanis openly discuss the post-Qaboos era. Many Omanis and analysts believed that Haitham or one of his brothers was a front runner to succeed Qaboos, but succession remained unclear. Qaboos purposely distanced royal family members from spheres of power during his rule, depriving his successor of deep experience governing the country.
In his previous positions, the new sultan served as minister of culture and heritage and undersecretary for the Ministry of Foreign Affairs. In fact, in his first speech as sultan on 11 January, Haitham promised to continue Muscat’s policy of peaceful coexistence with neighboring countries. Haitham also led the committee overseeing the Oman 2040 vision – a broad strategy that lays out the country’s national priorities over the next two decades. He has links to the country’s business elite and has demonstrated an interest in commercial affairs. This experience will be beneficial as the sultan turns to the country’s mounting economic challenges.
It’s the Economy, Haitham
Qaboos is widely credited for ushering in an unprecedented level of economic development and infrastructural connectivity in Oman. The country was severely underdeveloped during the contentious leadership of Qaboos’ father, Said bin Taimur al-Said. But in the final years of Qaboos’ reign, many Omanis privately worried that the ailing sultan was unable to implement controversial economic reforms. After decades of government-led economic diversification initiatives, the oil and gas sector still accounts for more than 70% of government revenue. When oil prices collapsed in 2014-15, this hydrocarbon dependency strained government finances.
Despite limited fiscal resources, the Omani government has continued to spend beyond its means. Year-on-year budget deficits have resulted in soaring government debt, which reached an estimated $50 billion in 2019, up from $4 billion in 2014. Gross general government debt jumped from below 5% of gross domestic product to nearly 50% in just four years; estimates suggest this debt could reach as high as 64% by 2022. Oman’s economic policymakers also face increasing pressure to preserve the country’s currency peg, according to Ziad Daoud, Bloomberg’s chief Middle East economist.
The country has drawn heavily on its sovereign wealth fund, the State General Reserve Fund, to help finance fiscal deficits. An estimated $18 billion worth of assets are in the country’s State General Reserve Fund, and the Central Bank of Oman has approximately $17.4 billion in gross international reserves, a rather small sum given the country’s consistent budget deficits. Major rating agencies have rated Omani bonds as “junk,” citing the dim prospects for fiscal consolidation. As the new sultan assumes his duties, the likelihood of long overdue fiscal consolidation remains remote, since generous cash transfers, bonuses for government employees, and the creation of government jobs tend to accompany leadership transitions in the region.
Other economic indicators paint a mixed picture. Unemployment rates remain stubbornly high, especially among young Omanis. The World Bank estimates Omani youth unemployment at 49%. Growth and foreign direct investment have not yet achieved the steady, sustained progress needed to boost investor confidence. The Omani economy contracted by 1.9% in nominal terms during the first half of 2019, owing to a decline in nonpetroleum industrial activities and the service sector. Oman’s central bank forecasted 1.1% growth in 2019, while the World Bank’s growth estimate was 0.0%. The World Bank, though, expects growth to rebound to 3.7% and 4.3% in 2020 and 2021, respectively. FDI inflows, which hovered between $2.3 billion in 2016 and $2.9 billion in 2017, spiked to $6.4 billion in 2018. As in other Gulf Arab states, oil and gas investments account for much of the country’s inward FDI.
Prioritizing Economic Reform
Critical domestic and economic challenges will determine the early success of the new leader. Haitham must prioritize three key components of economic policy: efficient spending, quality investments and high-impact reforms.
Oman’s budget for 2020 projects a 2% increase in spending compared to 2019 and a modest reduction in the budget deficit. Unlike neighboring governments, such as Dubai’s, which increased its 2020 expenditures by 17%, the Omani government confronts substantial fiscal constraints. The government plans to finance 80% of the expected $6.5 billion deficit through foreign and domestic borrowing, while reserves will fill the remaining gap in spending.
Oil and gas revenue constitutes 72% of government revenue and the 2020 budget assumes a conservative oil price of $58 per barrel. Rising oil prices owing to geopolitical risk may temporarily boost government coffers and provide a short-term fiscal cushion. Oil prices spiked 5% after the 3 January attack that killed Iran’s Islamic Revolutionary Guard Corps commander, Qassim Suleimani, in Iraq. Futures for Brent crude briefly exceeded $70/bbl on 6 January – a price threshold not reached since 16 September 2019. Following Iran’s 8 January retaliatory attack on Iraqi bases housing U.S. forces, Brent briefly peaked at $71.75/bbl, but futures dropped to $65.65/bbl shortly thereafter. Yet the subdued global market reaction to Gulf tensions suggests that a financial windfall from sustained high oil prices is unlikely.
Therefore, Oman’s longer-term spending patterns must become more efficient. After social spending, which constitutes around 40% of the budget, the government plans to pour $13.8 billion (approximately 40% of the budget) into investment projects with high employment and growth potential. This investment spending focuses on five “promising” sectoral clusters – transportation and logistics, manufacturing, tourism, fisheries, and mining – emphasized in the country’s Five-Year Development Plan (2016-2020) and broadly aligned with the objectives of Oman 2040. State-owned enterprises, such as the Oman Global Logistics Group and Oman Tourism Development Company, will facilitate investments into these sectors.
These sectors face stiff regional competition from neighboring states with deeper pockets. The United Arab Emirates is the Gulf’s de facto logistics hub, and Qatar is spending heavily to outfit its airport and port free zones with cutting-edge logistics technology. Oman, on the other hand, highlights the comparative advantage of its ports and free zones being located further away from the tensions emanating from the Strait of Hormuz.
Oman may struggle to compete with its Gulf neighbors in high-priority sectors, such as tourism. Saudi Arabia is aggressively promoting its tourism industry and, in September 2019, the kingdom introduced an e-visa program allowing citizens from 49 countries to apply for tourist visas that will be valid for three years. The UAE, Bahrain and Qatar also remain popular destinations for global travelers. Oman may serve as a second stop for Gulf-bound tourists interested in niche activities, such as adventure sports and ecotourism.
Attracting foreign investments that provide a demonstrable contribution to the local economy is a top priority for policymakers. On 1 July 2019, Qaboos issued four royal decrees – including a Foreign Capital Investment Law – to attract new investors. Yet high hopes for FDI, especially in non-oil sectors, have failed to materialize. Some Omanis express frustration that the sultanate’s role as a negotiator in disputes with Iran and Qatar has failed to produce financial dividends.
Omani nationals constitute approximately 60% of the country’s population; therefore, Oman is especially concerned about the ability of foreign firms to generate jobs for locals, transfer skills and pay taxes. The Chinese have largely failed in this regard, with the slow progress and scaled-back nature of Chinese projects in the Duqm Special Economic Zone symbolizing a more general skepticism of economic partnerships with China. There is room for cooperation: Oman’s government raised $1 billion by selling a 49% stake in the Oman Electricity Transmission Company to the State Grid Corporation of China. Oman’s state-owned holding companies intend to privatize additional subsidiary companies in the coming years.
High-impact economic reforms must take precedence, and certain policy approaches require reconsideration. Oman has not implemented a value-added tax, as agreed upon in the GCC’s Common Excise Tax Agreement of 2016. The country’s modest excise tax – expected to generate around $260 million annually – offers no financial windfall. Oman’s increasingly strict approach to workforce nationalization is understandable given the country’s demographic composition, although it risks making the country less attractive for expatriate residents and foreign firms. Rather than supply-focused local employment generation using bans on expatriate work visas, for example, a demand-focused approach emphasizing local skills development is more sustainable for the long term.
That some Omanis view the controversial economic reforms in Saudi Arabia as bold, necessary steps suggests that an appetite for reform exists in Oman. The political transition presents the new sultan and his government with a choice to maintain the status quo of economic policy or undertake a deeper, structural transformation of prevailing economic institutions. The former scenario is more likely, but decisive action on long-overdue economic initiatives is urgently needed.
Robert Mogielnicki is a resident scholar at the Arab Gulf States Institute in Washington. (AGSIW 13.01)
11.7 OMAN: Oman’s Fiscal Challenges to Remain Post-Succession
On 15 January, Fitch Ratings said that the elevation of Haitham bin Tariq al-Said as Oman’s new Sultan will entail continuity of fiscal policies. The rapid succession is in line with our long-standing assumption of a smooth transition from his cousin, Sultan Qaboos, who died on 10 January at aged 79. Twin fiscal and external deficits and rising indebtedness remain the key risks to Oman’s BB+/Stable rating, which was affirmed in July 2019.
As the chosen successor of Sultan Qaboos and a senior member of the government and the royal family, we believe Sultan Haitham, who is 65, will adhere to previous policy approaches. He will also face many of the same constraints to reform as his predecessor, in particular the need to ensure Oman’s security in an unstable region and to provide economic opportunities to a young and underemployed population. The speed with which he was chosen limits the risk of a substantial loosening of fiscal policy to support the leadership transition.
There is nonetheless a possibility that Sultan Haitham could pursue bolder fiscal and economic reform than his predecessor, who had suffered from ill health in recent years. Sultan Qaboos was pivotal to Oman’s development during his nearly 50-year reign and held many senior positions, including central bank governor and prime minister, as well as those of the ministers of finance, foreign affairs and defense.
Preliminary 2019 data suggest that Oman’s fiscal deficit decreased marginally to 8.4% of GDP last year, compared with the forecast of 9.8% in our last rating assessment. However, excluding proceeds from asset sales the deficit would have increased, amid falling oil revenue and higher spending. The government is budgeting for a higher deficit of 8.7% for 2020 despite its expectation of further asset-sale proceeds and some spending cuts. (This compares with a forecast of 8% for 2020 in our last assessment.) The 2020 budget is consistent with our previous assumption that government debt will rise above 60% of GDP in 2020 and that sovereign net foreign assets will become negative; both indicators will then be worse than ‘BB’ category medians.
On the external political front, Sultan Haitham has announced that he intends to continue Oman’s policy of neutrality, which appears to have widespread support within the country. In Fitch’s view, this policy – along with Oman’s access to other sources of financing including debt issuance, asset sales and drawdowns from reserve funds – is one of the reasons why Oman, unlike Bahrain, has thus far not sought more financial support from the Gulf Cooperation Council. (Fitch 15.01)
EDI’s other services include development of feasibility studies and tailored research reports, as well as identification of potential joint ventures for commercial clients. For more information on how we may better assist you, please visit our Web site at: http://www.atid-edi.com.
* END *