A Middle Eastern Hotbed of Medtech Innovation

While the Middle East is rife with civil wars, sectarian violence, religious extremism, and other challenging issues, the region is home to some to some of the most innovative medical device manufacturers. In particular, Israel stands out as a significant player in the medtech market.

While Israel is no larger than New Jersey, this Middle Eastern country graduates thousands of engineers from the Israeli Defense Forces every year. As of last month, the country is home to 700 individual medical device manufacturers. Due to its significant research and development initiatives, the country has been able to land the highest number of medical device patents per capita. In addition, the country has high flexibility, allowing for rapid adaptation to changes in regulatory or economic environments. In particular, its imaging sub-sector stands out for its strong growth in recent years.

For example, Cardiosonic (Tel Aviv, Israel) landed $6.1 million in its latest series B funding round for its ultrasound-based renal denervation therapy. In the world of neurostimulation, Brainsway (Jerusalem, Israel) stands out for widespread approval of its Deep TMS system, a device for the treatment of autism, Alzheimer's disease and depression.

Unlike the United States, Israeli venture capital investments are growing at a rapid pace. Several different factors prompted strong growth in the Israeli medical device market.

Bordered by several countries with different ethnic and religious backgrounds than its own, Israel has long been a security-minded state. Because of this, defense spending in the country has been very high. The Israeli Defense Forces is one of the highest-funded military outfits based on its size. Each year, the IDF spends billions of dollars on training and weapons development.On top of this, mandatory military service has produced a glut of engineers in the country. Since every 18-year-old is required to serve in the IDF for a few years, many young adults emerge from their military time with a high-tech degree. Every year, the IDF generates thousands of young, innovative engineers.

"When they leave defense, they have the ability to come up with ideas and, more important, they have the courage at a young age to risk years of salary by sitting in the garage or the back office somewhere, trying to come up with something new," notes Uval Yanai, a senior vice president at Israeli medical device manufacturer Given Imaging.

Given Imaging was founded by a military graduate of the IDF. Gabi Iddan, previously an engineer working at an Israeli government R&D initiative, founded the company after pioneering the development of miniaturized missile guidance technology. Iddan was able to redesign this missile guidance technology to create the PillCam, a miniature capsule with two embedded cameras. After a patient swallows the device, physicians can visualize an individual's intestines without the need for invasive diagnostics.

According to the Espicom Business Intelligence forecast, the Israeli medical device market may be worth $1.096 billion in the next three years. In 2011 alone, almost two-thirds of the $385 million invested in life sciences research went towards medical device manufacturers.