Mythoi of a flourishing start-up hub

The sudden downfall of the giant pharmaceutical company Teva based in Israel but with branches in many countries sent shivers down the spine of investors. Teva is the darling of the Israeli government. Without doubt it is a flagship company that was supported in many ways by various fiscal incentives.

The strategy to help Teva grow resulted in making it a myth as it grew in stature and expanded in international markets specialising in manufacture of top-quality medical equipment.  During, its meteoric growth it supported tens of thousands of families and contributed to the prosperity of Israel’s economy as it gained prestige as one of the world’s largest and best run pharmaceutical companies.

In its heyday, Teva kept its plants in Israel, even when it could reduce production costs and transfer some of them to India. In Malta, three years ago Teva announced the acquisition of Actavis Generics in a bid to improve its international commercial opportunities and significantly enhance the global market. Sadly, lacking R&D in Malta, the generics producer was out on a limb as any future development of new medical products depends exclusively on innovation created at its overseas headquarters.

At its peak, Actavis ran two manufacturing facilities in Bulebel and Hal-far. Teva completed its ambitious purchase of Actavis Generics, and in short while the Malta plant laid off 200 workers including qualified lab technicians. The world’s largest maker of generic drugs took a nose dive. Generic-drug sales in North America fell again, and are down 34% since their recent peak in late 2016.

When Schultz became CEO last year, US generic drug prices were tumbling and Teva faced increased competition for some of its products. Inevitably, it started shedding 25% of the company’s work force, or about 14,000 employees, and closing factories and research centres.  Yet, the myth of a Unicorn does not fizzle out because Teva started in humble proportions and then helped by government subventions in Israel, it researched smart technology which helped it to flourish and turn out to be the envy of many.

Due to such a smart policy of helping start-ups by direct support for innovation especially in biotech and digital sectors, one meets with other success stories.  In Israel, these start-ups are fully funded by venture-capital and other business angels.  It is part of Israel’s booming “startup-nation” economy, as it manages the most dynamic innovation ecosystem outside America.

Misfortune hit Teva. This resulted from bad management yet the fact remains that Teva stood as a national champion that made Israel very proud of its protégé. A veritable myth in the international arena.  Perhaps, we can learn a lesson here and try to cultivate a flair for home-grown research hubs which may be the start of an incubator for local research staff to focus on cutting-edge technology. Government in its budget had allocated over €75 million to build a new campus in Smart City and this may be an ideal venue to host an innovation centre.

Only thus can we attract international business to exploit a top-end R&D status and with government support attract talent - this is a particularly shy bird.  It is not an easy journey and many countries want to emulate the commercial success which rewarded Boston, Silicon Valley, Singapore and Israel over the past fifty years. Even China is investing massively in Pearl River Delta town of Shenzhen to emulate the success of Silicon Valley.

Can our country, albeit small and lacking indigenous materials, rise to the occasion to surf gloriously over the tide to grab this opportunity? Alas, the dream of having an international innovation and business accelerator centre of calibre may prove to be a true catalyst to attract and nurture future investment. Three years ago, a PKF delegation visited Massachusetts Institute of Technology (MIT) and CIC an accelerator in Boston, USA to explore links to Malta as a potential business accelerator and/or Life Sciences hub.

Why CIC? A number of high-profile companies know their baptism at CIC – including HubSpot, which now employs over 1,100 people, and raised $125 million through its IPO last October, and Greatpoint Energy, which several years ago announced a $1.25 billion deal to build reactors in China. Additionally, Android co-founder Rich Miner built his unique Google Android software.

Rich established Google’s New England headquarters there. CIC also has a non-profit sister, the Venture Cafe Foundation (this provides a Forum for venture capitalists to scout and help fund new talent). Having toured its offices and laboratories, the delegation from PKF were impressed by the number of dedicated entrepreneurs. These successful start-ups are real and not a myth. They work hard to seek the proverbial Alchemist Stone.

Granted, it is not an easy journey and many countries want to emulate the commercial success of Silicon Valley and MIT. PKF introduced such organisations to the respective government agencies which are funded to conduct international business promotion. The reaction was encouraging but so far no grass shoots appear to have taken root. The spirit is willing but the body is weak.

Certainly, more support by the State or through EU cohesion funds is needed and we may augur that the promised IT and Innovation campus at Smart City does not fade away. It is encouraging to quote Stanley Mifsud, CEO at Mimcol – a state organisation responsible for nurturing commerce. He writes in the Lufthansa airline magazine where he mentioned inter alia, that the next building block embraces the object of reinforcing Malta’s credentials as a start-up hub which involves a government policy to attract an International Accelerator.

We augur Mifsud’s bold prediction materialises and that Mimcol’s objective to bolster our ecosystem will meet with the success it deserves.

As always, fortune favours the bold.